Deck 28: Environmental Protection

Question 1

External costs are

A)Domestic economic impacts of foreign events.
B)The difference between social and private costs.
C)Outside costs that producers absorb.

Answer 1

The difference between social and private costs.

Question 2

The reason pollution occurs is because people tend to

A)Consider the impact of their activities on society first.
B)Maximize their personal welfare,balancing private benefits against private costs.
C)Maximize their personal welfare,balancing social benefits against social costs.

Answer 2

Maximize their personal welfare,balancing private benefits against private costs.

Question 3

External costs occur because

A)Private costs do not reflect the full costs to society.
B)Government failure increases costs for the firm.
C)All costs are absorbed by the firm.

Answer 3

Private costs do not reflect the full costs to society.

Question 4

In general,a firm's efficiency decision will result in

A)A plant that maximizes profits.
B)A pollution-causing production process if that process minimizes costs.
C)An unpolluted environment.

Question 5

According to EPA studies,the United States generates over ____ billion tons of solid waste each year.

A)50
B)100
C)5

Question 6

The behavior of profit-maximizing producers is guided by

A)Philanthropy.
B)Self-interest.
C)Aesthetic concerns.

Question 7

Thermal pollution is brought about by the discharge of

A)Sulfur dioxide.
B)Steam or heated water.
C)Carbon dioxide.

Question 8

If the social costs of an economic activity are $200 and the private costs are $200,then the external costs of the activity are ____,and market failure _______.

A)$0;does not occur
B)$400;does not occur
C)$0;occurs

Question 9

When external costs are present,

A)There is market failure.
B)There is government failure.
C)Private costs are greater than social costs.

Question 10

Which of the following is assumed to be the most important motivation for producers?

A)The desire to minimize external costs.
B)The desire to maximize economic profits.
C)The desire to minimize social costs above private costs.

Question 11

According to the text,which of the following is a form of water pollution?

A)Slaughter waste.
B)Thermal pollution.
C)Smog.

Question 12

From an economic standpoint,the pursuit of a zero-pollution environment is

A)The morally correct strategy,and costs should not be a consideration.
B)Probably not in society's interest because of the high opportunity costs.
C)The economically correct strategy.

Question 13

External costs are the difference between

A)Social costs and private costs.
B)Benefits and costs.
C)Average and marginal costs.

Question 14

Which of the following is not the case when social costs are greater than private costs?

A)The market's price signals are flawed.
B)Resources are allocated efficiently.
C)There is market failure.

Question 15

Assigning values to environmental damage is relatively

A)Easy because of current scientific techniques.
B)Easy because all items have a market value.
C)Difficult because many items have intangible benefits and thus do not have a market price.

Question 16

According to the text,which of the following is the prime cause of the greenhouse effect?

A)Sulfur dioxide.
B)Nitrogen oxide.
C)Carbon dioxide.

Question 17

If a firm adopts a production process that is costly in order to reduce pollution,the result is

A)A decrease in the firm's MC curve and a decrease in the firm's profits.
B)An increase in the firm's ATC curve and an increase in the firm's profits.
C)A decrease in the profit-maximizing rate of output and a decrease in the firm's profits.

Question 18

An external cost is borne by

A)The producer of the good.
B)The consumers of the good.
C)A third party to the market transaction.

Question 19

Electric power plants account for over ____ percent of all thermal discharges.

A)80
B)60
C)40

Question 20

Sophisticated waste treatment plants can reduce organic pollution by up to ____ percent.

A)99
B)95
C)75

Question 21

When the government requires a firm to pay an emission charge in proportion to its pollution,

A)Both average total costs and marginal costs rise.
B)Average total costs rise,but marginal costs do not.
C)Marginal costs rise,but average total costs do not.

Question 22

By altering market incentives,the government tries to shift

A)External costs to society.
B)External costs to the producer.
C)Private costs to society.

Question 23

Which of the following is not a market incentive to discourage pollution?

A)Emission charges.
B)Higher user fees.
C)Regulatory intervention.

Question 24

If a manufacturer does not have to pay for its contribution to pollution,it will produce

A)Too much output from a social viewpoint.
B)Inefficiently from a private viewpoint.
C)Unprofitably from a private viewpoint.

Question 25

A completely successful emission charge would

A)Shift the private MC curve until the curve intersects with price at zero output and pollution is completely eliminated.
B)Shift the private MC curve to the same position as the social MC curve.
C)Shift the social MC curve to the same position as the private MC curve.

Question 26

Social costs are

A)The total resource costs of an economic activity.
B)Usually less than private costs.
C)The costs of an economic activity borne by the producer.

Question 27

All of the following are negative externalities in production except

A)Secondhand smoke in a restaurant.
B)Acid rain produced by power plants.
C)Carbon dioxide emissions from the production of steel.

Question 28

When private and social costs are equal,

A)Market failure occurs.
B)There are no external costs.
C)Government failure occurs.

Question 29

A five-cent container deposit on bottles

A)Decreases the incentive to recycle.
B)Increases the incentive to recycle.
C)Makes it more profitable for firms to use these containers.

Question 30

The market will overproduce goods that have external costs because

A)Producers have lower costs than society has.
B)Producers experience higher costs than society.
C)The government is not able to produce these goods.

Question 31

Under the market mechanism,a market characterized by external costs will produce too

A)Little output and too much pollution.
B)Much output and too much pollution.
C)Little output and too little pollution.

Question 32

Which of the following is a market incentive to discourage pollution?

A)Emission charges and user charges.
B)User charges and government regulation.
C)Command-and-control options.

Question 33

An example of a negative externality in consumption is

A)A power plant's release of thermal pollution into a nearby river.
B)A passenger on a train littering.
C)A large cattle farm creating air pollution.

Question 34

A power plant in Illinois produces electricity by burning coal.This results in acid rain that kills trees and wildlife in New York.This is an example of

A)An external cost.
B)Inequity.
C)A public bad.

Question 35

If a firm that pollutes wants to maximize profits,it will produce where

A)The social value of production equals the social cost of production.
B)Private and social costs are equal.
C)Marginal revenue and private marginal cost are equal.

Question 36

If firms were charged the full social opportunity cost of the resources they used,there would be

A)No external costs.
B)Government failure.
C)Market failure.

Question 37

When external costs exist,

A)There is government failure.
B)Market prices do not convey the full costs of production.
C)The market achieves the optimal mix of output.

Question 38

In order to maximize social welfare,a firm's production of a good should occur at the output where

A)Social marginal cost equals social marginal benefit.
B)Price equals social marginal revenue.
C)Marginal revenue equals price.

Question 39

A polluting company can be billed in proportion to its pollution through

A)Higher user fees.
B)Emission charges.
C)Privatization.

Question 40

An emission charge

A)Reduces private marginal cost and reduces output.
B)Reduces private marginal cost and increases output.
C)Increases private marginal cost and reduces output.

Question 41

Excessive process regulation may

A)Raise the costs of environmental cleanup.
B)Encourage cost-saving innovation.
C)Cause market failure.

Question 42

If the tax on gasoline is increased to provide incentives to curb air pollution,then the tax serves as

A)A user fee.
B)A command-and-control standard.
C)A pollution fine.

Question 43

The optimal rate of pollution occurs where

A)MR = MC for the production of the good that produces pollution.
B)The marginal benefit equals the marginal cost of pollution abatement.
C)The marginal benefit of pollution abatement is zero.

Question 44

Tradable pollution permits,when compared to command-and-control options,tend to

A)Provide the same amount of pollution abatement at a higher cost.
B)Provide the same amount of pollution abatement at a lower cost.
C)Provide the same amount of pollution abatement at the same cost.

Question 45

A market for power plant pollution rights will

A)Reduce the total amount of pollution by power plants beyond the required reduction level.
B)Lower pollution control costs.
C)Result in all power plants meeting pollution standards at lower costs.

Question 46

Many economists would argue that

A)The optimal amount of pollution is greater than zero.
B)All pollution should be eliminated.
C)The market mechanism can handle pollution without any government intervention.

Question 47

If the government imposed a green tax on gasoline,ceteris paribus,the price of gasoline should

A)Increase.
B)Decrease.
C)Remain unchanged.

Question 48

The primary purpose of tradable pollution permits is to

A)Reduce the level of pollution to optimal levels.
B)Reduce the cost of pollution control.
C)Eliminate private costs.

Question 49

Pollution control efforts

A)Are free of opportunity costs.
B)Change what and how much is produced.
C)Reduce private marginal costs.

Question 50

Government intervention that fails to improve economic outcomes is known as

A)Social failure.
B)Government failure.
C)Market failure.

Question 51

Laws requiring the sorting and recycling of trash are an example of

A)Pollution fines.
B)Higher user fees.
C)Process regulation.

Question 52

Emission charges,user fees,and pollution fines increase the _______ of polluting.

A)opportunity cost
B)market failure
C)external costs

Question 53

Which of the following is an example of bypassing the market through regulation to achieve environmental protection?

A)Privatization.
B)Command-and-control standards.
C)Pollution fines.

Question 54

When environmental regulations continue long after they are obsolete,there is

A)Privatization.
B)Deregulation.
C)Government failure.

Question 55

When the government requires specific processes for reducing pollution,it is using

A)A command-and-control approach.
B)Green taxes.
C)A tradable permit program.

Question 56

By implementing user fees,the government tries to shift

A)Private costs to society.
B)Social costs to the producer.
C)External costs to users.

Question 57

The command-and-control strategy for pollution reduction refers to

A)Material recycling.
B)Standards used to reduce pollution.
C)The use of tradable permits.

Question 58

The command-and-control approach to pollution reduction

A)May be less efficient than a market-based option.
B)Lowers private marginal costs.
C)Lowers market prices.

Question 59

The Comprehensive Environmental Response,Compensation,and Liability Act of 1980 reduced pollution through

A)Central planning.
B)Command-and-control regulatory standards.
C)Pollution fines.

Question 60

The Clean Air Acts of 1970 and 1990 reduced pollution through

A)Market incentives.
B)Command-and-control regulatory standards.
C)Privatization.

Question 61

Refer to Table 28.1.Suppose the government commands each firm to reduce its emissions by one ton each.What is the total cost?

A)$600.
B)$780.
C)$920.

Question 62

In Figure 28.1,if pollution costs are external,the rate of output will be

A)Less than 200 units.
B)200 units.
C)320 units.

Question 63

In Figure 28.1,if the rate of output is 320 units,

A)Social costs exceed private costs.
B)There is government failure.
C)Pollution costs are internalized.

Question 64

A chemical-producing firm is located just upstream from an electric power plant.Instead of the more expensive procedure of burying its wastes,the chemical-producing firm begins dumping its waste into the stream.This causes increased variable costs for the power plant,which uses water from the stream to cool its turbines.From society's viewpoint,the chemical producer's pollution causes an

A)Overproduction of chemicals and an underproduction of electric power.
B)Underproduction of chemicals and an overproduction of electric power.
C)Optimal production of chemicals and electric power.

Question 65

Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The most efficient transaction would result in

A)Zero pollution.
B)The steel plant reducing its emissions.
C)The paper plant reducing its emissions.

Question 66

The costs of pollution control will

A)Always be borne entirely by the pollution producer.
B)Always be passed on completely to the consumer.
C)Be distributed between the producer and the consumer.

Question 67

Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The total cost to reduce emissions by a total of two tons could be as low as

A)$0.
B)$480.
C)$900.

Question 68

Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.The most efficient transaction would result in

A)An increase in emissions by the steel plant and a reduction by the paper plant.
B)A reduction in emissions by the paper plant and no change for the steel plant.
C)An increase in emissions by both plants.

Question 69

The marginal cost to society of reducing pollution increases as the level of pollution reduction increases because of the law of

A)Demand.
B)Diminishing returns.
C)Diminishing marginal utility.

Question 70

Refer to Figure 28.2.If there were no emissions fees on a firm,its marginal cost curve would be

A)MC_1.
B)MC_3.
C)MC_2.

Question 71

Refer to Table 28.1.Suppose the government allows these two firms to trade pollution permits.What would be the price of a permit to emit the second ton of pollutants?

A)Less than $200.
B)Between $200 and $280.
C)Between $280 and $400.

Question 72

In cost-benefit analysis,the government should intervene as long as

A)The government corrects market failures without government cost.
B)The value of government failure exceeds the value of market failure.
C)The improvement in the environment exceeds the costs.

Question 73

Refer to Figure 28.2.Assume this firm initially has marginal costs equal to Private MC₁ and is polluting.If the government decides to use emission charges to reduce pollution,the firm's MC curve will shift to

A)MC₃ and the rate of output will decrease.
B)MC₃ and the rate of output will increase.
C)MC₂ and the rate of output will decrease.

Question 74

The marginal cost of reducing pollution

A)Rises as the environment gets cleaner.
B)Falls as the environment gets cleaner.
C)Is constant.

Question 75

Refer to Figure 28.2.If this firm is producing a product that does not generate any externalities,the allocatively efficient output would occur where

A)Price = MC₃.
B)Price = MC₁.
C)Price = MC₂.

Question 76

In Figure 28.1,emission fees will

A)Reduce external benefits.
B)Increase the marginal cost of production.
C)Raise marginal revenues.

Question 77

A chemical-producing firm is located just upstream from an electric power plant.Instead of the more expensive procedure of burying its wastes,the chemical-producing firm begins dumping its waste into the stream.This causes increased variable costs for the power plant,which uses water from the stream to cool its turbines.The chemical producer's dumping of waste into the stream causes

A)The MC of the chemical firm to shift downward and the MC of the power company to shift upward.
B)The MC of the chemical firm to shift upward and the MC of the power company to shift downward.
C)Only the MC of the chemical firm to shift upward.

Question 78

When thinking about the real costs of environmental cleanup,we should take into consideration

A)The total costs of the cleanup as estimated by the Environmental Protection Agency.
B)A comparison of the costs of cleanup to the large size of the U.S.economy.
C)The marginal costs but not the marginal benefits.

Question 79

The marginal benefit of reducing pollution

A)Rises as the environment gets cleaner.
B)Falls as the environment gets cleaner.
C)Is constant.

Question 80

In Figure 28.1,if the externality is internalized,the rate of output will be

A)Less than 200 units.
B)200 units.
C)320 units.