Question 1

Suppose that the United States allowed its domestic fuel producers to use ethanol made from any source (corn or sugar). What is likely to happen to U.S. production of corn ethanol and U.S. imports of sugar ethanol?

Accepted Answer

Allowing fuel producers to use ethanol made from any source would likely lead to a decrease in U.S. production of corn ethanol, as producers would have the option to use cheaper sugar ethanol instead. At the same time, this policy change would likely increase U.S. imports of sugar ethanol, as foreign producers might be able to offer cheaper prices than domestic corn ethanol producers. Therefore, choice C is the best answer.

Question 2

U.S. tire production involves large social costs from air pollution. How will stronger U.S. environmental regulations requiring firms to reduce their air pollutants affect U.S. tire production?

Accepted Answer

Stronger U.S. environmental regulations requiring firms to reduce their air pollutants will increase the cost of production for tire companies, as they will have to invest in technology and processes that reduce air pollution. This increase in cost will likely cause decreases in U.S. tire production, as tire companies may choose to shift production to countries with more lenient environmental regulations or simply reduce their overall production levels.

Question 3

Suppose that there is a negative externality associated with alcohol consumption in the United States (e.g., the costs of publicly funded alcoholism treatment centers). What will happen to the social costs of this externality if the United States eliminates all tariffs on alcohol imports?

Accepted Answer

Eliminating tariffs on alcohol imports will likely lower the price of alcohol, potentially increasing consumption. This increase in consumption can exacerbate the negative externalities associated with alcohol consumption, such as the costs of publicly funded alcoholism treatment centers, thereby increasing the total social costs.

Question 4

An example of the tragedy of the commons is:

Accepted Answer

Overfishing in international waters is an example of the tragedy of the commons, where a shared resource (in this case, the fish in the ocean) is overused and depleted because individual users have no incentive to conserve it. No one country or individual has exclusive rights over the fish in international waters, so everyone has equal access to it, but this leads to overfishing and ultimately harming the ecosystem.

Question 5

The VER between the United States and Japan was shown to _____ gas consumption, _____ the use of energy, and _____ gas mileage from automobiles.

Accepted Answer

The VER between the United States and Japan was shown to increase gas consumption, increase the use of energy, and decrease gas mileage from automobiles.

Question 6

What would happen to U.S. economic welfare if the U.S. eliminated tariffs on solar panel imports?

Accepted Answer

Eliminating tariffs on solar panel imports would increase the supply of solar panels in the U.S. and decrease their price. This would increase U.S. consumption of solar panels, leading to social gains such as lower carbon emissions and reduced dependence on fossil fuels. Thus, U.S. economic welfare would increase due to the social gains from increased U.S. consumption of solar panels.

Question 7

The fundamental cause of the tragedy of the commons is:

Accepted Answer

The tragedy of the commons occurs when a shared resource (such as a public grazing land or fishery) is overused and depleted because individuals have no incentive to conserve it. This lack of incentive is often caused by the absence of defined property rights, which means that no one has exclusive ownership over the resource and therefore nobody has a direct interest in preserving it. International trade, ignorance, and tariffs may influence the management of these shared resources but they are not the fundamental cause of the tragedy of the commons.

Question 8

U.S. tire production involves large social costs from air pollution. How will stronger U.S. environmental regulations requiring firms to reduce their air pollutants affect U.S. tire imports?

Accepted Answer

Stronger environmental regulations increase production costs for domestic tire manufacturers, making imported tires more competitively priced in comparison, thus likely increasing imports.

Question 9

Suppose that production of steel in the United States involves negative externalities. Now suppose that U.S. tariffs on steel imports are eliminated and U.S. imports of steel increase. What effect does the elimination of these tariffs have on total social costs associated with steel production in the United States?

Accepted Answer

Eliminating tariffs on steel imports allows for increased imports, which can reduce domestic production of steel. Since domestic production involves negative externalities (e.g., pollution), reducing this production decreases the associated negative externalities, thereby lowering total social costs.

Question 10

Which of the following is an example of the tragedy of the commons?

Accepted Answer

The overharvesting of many species of fish is a classic example of the tragedy of the commons. In this scenario, multiple individuals or groups have access to a shared resource (in this case, fish populations), but lack incentives to conserve it. Instead, they each face incentives to use as much of the resource as possible, leading to overharvesting and depletion of the resource. The tragedy of the commons is a problem that can occur in many different contexts, from the environment to finance to urban planning.

Question 11

The tragedy of the commons refers to the idea that:

Accepted Answer

The tragedy of the commons is the concept that refers to the degradation or depletion of a shared resource, such as a fishery, pasture, or atmosphere, due to individuals pursuing their self-interest and exploiting the resource beyond its capacity. This leads to a situation where the common property is overused, damaged or exhausted, and no longer available for anyone to use. Hence, common property does not always lead to a beneficial outcome, and there may be a need for interventions or regulations to prevent abuses, promote sustainable use, and allocate resources fairly. The other options are not relevant to the tragedy of the commons.

Question 12

Overharvesting of fish in international waters an example of what economic concept?

Accepted Answer

Overharvesting of fish in international waters is an example of a consumption externality, where the actions of individuals or companies harvesting fish impose costs on others, such as depleting fish stocks, without these costs being reflected in the market price.

Question 13

Why does the United States both import and export ethanol?

Accepted Answer

The U.S. has a diverse ethanol production industry, primarily based on corn, but regulations and market demands also encourage the import of ethanol from other sources, such as sugar ethanol from Brazil, creating a trade dynamic where both import and export occur.

Question 14

The story about the mass slaughter of buffalo in the United States is an example of:

Accepted Answer

The mass slaughter of buffalo in the United States is an example of the tragedy of the commons, where individuals or groups exploit a shared resource for their own benefit, leading to depletion or destruction of the resource. In this case, buffalo were hunted extensively for their hides and as a means of undermining the livelihood of Native Americans, which led to a massive decline in their population.

Question 15

The phenomenon known as the tragedy of the commons occurs whenever:

Accepted Answer

The tragedy of the commons occurs when there is no ownership of resources, leading to exploitation and depletion due to the lack of management. This happens because individuals pursuing their own self-interest will tend to overuse the resource, since the cost of using it is spread among all users but the benefits accrue to the individual. This creates a situation where the resource is depleted more quickly than if it were managed sustainably by a single owner.

Question 16

The tragedy of the commons refers to:

Accepted Answer

The tragedy of the commons is the idea that when everyone has free access to a resource, it will be overused and depleted. This occurs because people act individually in their own self-interest, rather than considering the common good. This can lead to the depletion of common resources such as water, air, and fish stocks, as everyone tries to take as much as they can for themselves.

Question 17

Which of the following is associated with increased use of solar panels?

Accepted Answer

The answer of Which of the following is associated with...

Question 18

Because of the relationship among ethanol production, sugar, and corn, the authors of your text have concluded that:

Accepted Answer

The relationship among ethanol production, sugar, and corn is that the sugar quota makes sugar so cheap in the United States that ethanol producers are using it instead of corn. As a result, there is a huge demand for less-environmentally-friendly corn as a substitute in food products and for ethanol, which is a big problem for the corn subsidy.

Question 19

Suppose that there is a negative externality associated with alcohol consumption in the United States (e.g., the costs of publicly funded alcoholism treatment centers). Will the United States be better or worse off if it eliminates all tariffs on alcohol imports?

Accepted Answer

Eliminating tariffs on imported alcohol may increase the consumption of alcohol, which could exacerbate the negative externality associated with alcohol consumption. Therefore, the United States will be better off only if the private gains from trade (i.e., lower prices and greater variety of alcohol) exceed the increased social costs of alcohol consumption (e.g., increased demand for alcoholism treatment) when tariffs are eliminated. This will depend on the price elasticity of demand for alcohol and the magnitude of the negative externality, among other factors.

Question 20

Suppose that there is a negative externality associated with alcohol consumption in the United States (e.g., the costs of publicly funded alcoholism treatment centers). What does this negative consumption externality imply about the relationship between the demand curve for alcohol and the social marginal benefit (SMB) curve for alcohol?

Accepted Answer

The presence of a negative externality implies that the private benefits of consuming alcohol (reflected in the demand curve) are higher than the social benefits (reflected in the SMB curve). This means the demand curve lies above the SMB curve because it does not account for the external costs to society.

Quiz 11: International Agreements: Trade, Labor, and the Environment

Suppose that the United States allowed its domestic fuel producers to use ethanol made from any source (corn or sugar) . What is likely to happen to U.S. production of corn ethanol and U.S. imports of sugar ethanol?