Deck 17: Externalities and the Environment

Question 1

Fish are

A)always renewable resources
B)renewable resources whenever property rights are well defined
C)renewable resources if they are taken and replaced at rates that provide a steady supply
D)renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught
E)renewable resources whenever property rights are well defined and can be easily enforced

Answer 1

C

Question 2

Property rights can be defined and enforced

A)only by the government
B)only by ethical norms
C)by the government and by ethical norms
D)only through constant renegotiation
E)by government, by informal social actions, and by ethical norms

Answer 2

E

Question 3

Some pollution occurs because property rights to some resources are welldefined.

Answer 3

True

Question 4

When an activity results in the imposition of external costs, markets willproduce more than the socially optimal level of that activity.

Question 5

Which of the following can be a renewable resource?

A)oil
B)timber
C)coal
D)iron ore
E)uranium

Question 6

An individual who drives a car without a muffler in an attempt to increasefuel economy is creating

A)a positive externality
B)a public good
C)a negative externality
D)a winner's curse
E)vertical inequity

Question 7

)Renewable resources are those for which

A)additional units can be purchased in the market
B)additional units can be purchased in the market or provided by government
C)worn­out units can be repaired for further use
D)periodic use can be continued indefinitely
E)additional sources are constantly being discovered

Question 8

Which of the following would not be considered a negative externality?

A)loud rap music at 2 a.m.in the apartment next door to you
B)traffic congestion
C)an Alaskan oil spill
D)measles vaccinations
E)air pollution

Question 9

All of the following are examples of negative externalities except one.Which is the exception?

A)water pollution
B)your roommate going on a diet
C)second­hand smoke
D)loud conversation in the workplace
E)your neighbor building a bomb shelter on her front lawn

Question 10

When consumption of a good or service produces benefits or costs that arenot reflected in the market price for the good, this is known as a(n)

A)externality
B)common pool problem
C)nonexcludable resource
D)public good
E)renewable resource

Question 11

Pollution and other negative externalities arise because

A)there are no enforceable property rights to open­ access resources
B)legislators cannot agree on what to do about them
C)they are the price consumers are willing to pay for production of goods and services
D)private property rights to pollute are controlled by businesses
E)science cannot decide how to control them

Question 12

When an activity results in the creation of external benefits, markets willproduce more than the socially optimal level of that activity.

Question 13

Pollution arises because

A)the atmosphere is a nonrenewable resource
B)the atmosphere is a renewable resource
C)of enforceable property rights
D)the atmosphere is an open­access resource
E)there is no supply of pollution curve

Question 14

A person can cause a negative externality by

A)becoming immunized
B)talking loudly in a restaurant
C)landscaping her lawn
D)paying taxes
E)attending school

Question 15

An externality is

A)a cost of a transaction that is borne by a third party
B)a benefit of a transaction that is enjoyed by a third party
C)a cost or benefit that arises when market price changes
D)any cost or benefit of a transaction that is not accounted for in the market price
E)the external revenue generated by a firm

Question 16

All of the following are sources of negative externalities except one.Whichis the exception?

A)a paper mill that pollutes a river
B)a person who throws a beer can out the window of a moving car
C)cars, which emit carbon monoxide
D)a solar water heater which is outside and obscure from view
E)products that contribute to the greenhouse effect

Question 17

The most likely reason why Los Angeles has so much smog is that residents

A)do not have strong, enforceable property rights to rapid transit
B)do not have strong, enforceable property rights to clean air
C)prefer dirty air to the inconvenience of rapid transit
D)prefer dirty air to the inconvenience of carpools
E)prefer dirty air to the inconvenience of eliminating smog

Question 18

Private property rights are easily assigned to open­access resources.

Question 19

If periodic use of a resource can be continued indefinitely, that resource issaid to be

A)removable
B)renewable
C)cyclical
D)recyclable
E)part of a common pool

Question 20

Oil is an example of a renewable resource.

Question 21

Marginal external cost equals marginal private cost minus marginal socialcost.

Question 22

The equilibrium price and quantity in a free market usually reflect privatemarginal costs and benefits, not social ones.

Question 23

Smokers and loud talkers who ignore the external effects of their actionsare being rational in the economic sense.

Question 24

To solve the common pool problem in fishing, governments can __________,or __________.

A)impose a depletion tax; prohibit resource use entirely
B)impose a depletion tax; restrict output
C)introduce an offsetting positive externality; prohibit resource use entirely
D)use a variable technology; impose a depletion tax
E)restrict output; prohibit resource use entirely

Question 25

If tuna in the sea are open­access resources, they will be used until themarginal value of additional use equals

A)the marginal product of the resource
B)the marginal revenue of the resource
C)infinity
D)negative infinity
E)zero

Question 26

The common pool problem

A)occurs whenever goods are not rivals in consumption
B)is an example of adverse selection
C)arises whenever property rights are well defined
D)is usually caused by government intervention into private markets
E)is one in which resources to which access is unrestricted will tend to be overused

Question 27

Unpriced by­products of production or consumption that impose costs onother consumers or firms are known as

A)negative externalities
B)effluent fees
C)pollution rights
D)positive externalities
E)moral hazards

Question 28

Which of the following is an example of an open­access resource?

A)a city subway system
B)a college education
C)an elementary school education
D)whales in the ocean
E)pandas in the zoo

Question 29

Suppose that the city builds a new park that is advertised as being "open tothe public," and within two months the grass in the park is ruined byoveruse.This would be an example of

A)a nonrenewable resource
B)a private good
C)the common pool problem
D)a positive externality
E)a renewable and excludable resource

Question 30

Open­access resources tend to be

A)conserved
B)taxed
C)overused
D)efficiently used
E)used in an environmentally sound manner

Question 31

Government restrictions on the use of an open­access resource

A)may improve efficiency
B)will decrease efficiency
C)are unnecessary
D)contribute to pollution of the resource
E)contribute to depletion of the resource