Deck 3: Dealing With Externalities: How Can We Save the Environment

Question 1

The view that pollution should involve efforts in which the market forces direct firms and individuals to undertake environmental protection actions voluntarily is most closely associated with the

A) Conservative position.
B) Liberal position.
C) Radical position.
D) Conservative and Radical positions.

Answer 1

A

Question 2

An example of a good or service with significant spillover benefits would be

A) medical services.
B) higher education.
C) a company operated day-care program.
D) All of the above.
E) None of the above.

Answer 2

D

Question 3

Which of the following is not a view advanced by any of our representative paradigms?

A) The legal system can provide redress for environmental damages.
B) Direct pollution controls will halt pollution.
C) Selling "rights to pollute" is one way of internalizing pollution costs into prices.
D) Spillover costs is not a problem that deserves serious public policy attention.
E) None of the above.

Answer 3

D

Question 4

Advocates of marginal social cost (MSC)-marginal social benefit (MSB) analysis would suggest spending

A) up to the point of greatest divergence between MSC and MSB.
B) where MSC = MSB.
C) the largest possible amount on pollution controls regardless of the benefits.
D) up to the point where MSB = 0.

Question 5

The concept of externalities refers to

A) the internalized cost of producing.
B) a situation where actual benefits or costs are not reflected in the market price of the good.
C) the difficulty in determining actual polluters.
D) None of the above.

Question 6

An example of external diseconomy would be

A) living downwind from a steel mill.
B) a situation where total social costs exceeded total revenues from a hazardous product.
C) a situation in which general costs to the public are not internalized in a firms production costs.
D) All of the above.
E) None of the above.

Question 7

According to Milton Friedman

A) voluntary exchange is possible under all market conditions.
B) "neighborhood effects" may justify intervening in the market.
C) direct controls are the best antipollution tactic.
D) there is no pollution problem.

Question 8

The Environmental Protection Agency (created in 1972) was given power to

A) set emission levels.
B) determine what fuels might be burned in automobiles.
C) close down polluters that pose an immediate threat to the public.
D) All of the above.
E) None of the above.

Question 9

Conservatives favor the following antipollution strategies:

A) No action at all.
B) Government subsidies of pollution control expenditures by private businesses.
C) Levying emissions taxes.
D) Creation of a government "superagency."
E) None of the above.

Question 10

Liberals generally claim

A) external diseconomies result from excessive government controls.
B) an external benefit does not reflect a market failure while an external cost does.
C) the EPA should be abolished.
D) the market economy provides few incentives to make investments that produce external benefits or lower costs.

Question 11

Liberals support which of the following antipollution strategies?

A) Purely voluntary actions.
B) Letting the political party in power establish the environmental standards.
C) Metering all effluents and taxing accordingly.
D) Use of direct intervention in particularly threatening cases of pollution.

Question 12

Generally, Radicals have opposed past pollution policies on the grounds that

A) government efforts have shown a bias on behalf of business.
B) pollution is a highly exaggerated problem.
C) they support the "bubble concept."
D) pollution ultimately reduces the aggregate rate of profit.

Question 13

The Kyoto Treaty of 1997 sought to

A) reduce import taxes on U.S. goods shipped to Japan.
B) regulate automobile safety.
C) avert a global climate change disaster.
D) relax international environmental standards.

Question 14

A "spillover cost" refers to the fact that not all costs of a good have been internalized into that good's price.

Question 15

By and large, Liberals are more likely to support direct controls of pollution levels than are Conservatives.

Question 16

Conservatives, Liberals, and Radicals agree that the acid rain problem is proof that all of the environmental efforts of the past several decades have done little or nothing to improve national environmental quality.

Question 17

The society is best served whenever the outlays for maintaining clean air are such that the marginal social benefit is just equal to the marginal social cost for the last unit of clean air obtained.

Question 18

Liberals and Conservatives agree that subsidies paid to firms that undertake cleanup activities is the best way for internalizing the external costs of pollution.

Question 19

Government subsidies--as a technique for inducing firms to clean up their effluents--is attractive because it is costless.

Question 20

Radicals argue that economic cost ought not to be the determining factor in pollution cleanup efforts.

Question 21

Opinion surveys indicate that most Americans have little interest in environmental problems.

Question 22

Both Liberals and Conservatives would rely upon some type of cost-benefit calculation to determine the practical limits to antipollution expenditures.

Question 23

Radicals hold that in cost-benefit analyses of pollution cleanups, there is an inherent tendency to underestimate the resulting social benefits.

Question 24

Air pollution is an example of an external economy.

Question 25

The EPA may set permissible emission levels for all industrial sites.

Question 26

Conservatives maintain that rigorous enforcement actions by the Environmental Protection Agency during the 1970s and 1980s actually reduced national economic output.

Question 27

There is no evidence that enforcing pollution standards on American industry has had any effect on lowering damage from pollution.

Question 28

One technique for balancing costs and benefits of antipollution efforts is to simply let the damaged parties initiate a lawsuit against those that harmed them.

Question 29

Liberals argue that George W. Bush's Administration has really stepped up funding for the Environmental Protection Agency compared to 1999.

Question 30

The United States is the world's strongest advocate for adoption of the Kyoto Treaty.