Deck 4: Pollution Problems: Must We Foul Our Own Nests

Question 1

When the marginal private benefit of an activity does not equal the marginal social benefit,which of the following exists?

A)Positive externality
B)Negative externality
C)Externality in consumption
D)Externality in production
E)External cost

Answer 1

C

Question 2

As additional units of pollution control are added,at some point each additional unit adds

A)Less than the previous unit to total benefits
B)More than the previous unit to total benefits
C)Less than the previous unit to total costs
D)More to total benefits than to total costs
E)Less to total costs than total benefits

Answer 2

A

Question 3

Which of the following best describes why pollution exists in the environment?

A)The environment has no capacity to recycle waste
B)All materials take a very long time to recycle in the environment
C)No waste can be completely recycled
D)Recycling processes fail to prevent wastes from accumulating in the environment
E)The environment's capacity to recycle exceeds the rate of waste disposal

Answer 3

D

Question 4

Which of the following creates a positive externality in consumption?

A)Polluting a river
B)Playing loud music
C)Vaccinations
D)Reducing the cost of producing of another good
E)Strip mining

Question 5

The term "marginal social benefit" means

A)Benefits that are just above the margin of being zero
B)The entire benefits obtainable from the activity
C)That part of the benefits covered by the costs of carrying on the activity
D)The change in total social benefits per unit change in the amount of the activity
E)The benefits of minimal quality goods and services

Question 6

The level of pollution increases when

A)A person breathes
B)Wastes are dumped into the environment
C)Wastes are dumped into the environment at a higher rate than wastes are recycled
D)New industrial plant opens
E)Recycling increases

Question 7

Which of the following is a service provided by the environment?

A)Use as a habitat
B)Provision of amenities
C)Provision of raw materials
D)Waste disposal
E)All of the above

Question 8

When there are no externalities,equilibrium in a market

A)Maximizes social well-being
B)Equates quantity supplied and quantity demanded
C)Equates MSB and MSC
D)Equates MPB and MPC
E)Does all of the above

Question 9

When a benefit of an action falls on other than the person (or persons)responsible for the action,which of the following exists?

A)Positive externality
B)Negative externality
C)Externality in consumption
D)Externality in production
E)External cost

Question 10

Which of the following creates a positive externality in production?

A)Polluting a river
B)Playing loud music
C)Vaccinations
D)Reducing the cost of producing of another good
E)Strip mining

Question 11

When the marginal private cost of an activity does not equal the marginal social cost,which of the following exists?

A)Positive externality
B)Negative externality
C)Externality in consumption
D)Externality in production
E)External cost

Question 12

People have an incentive to pollute when

A)There is collective consumption of an environmental service
B)No one has property rights to the environment
C)It is less expensive to pollute than to clean up
D)The MPC of polluting < MPC of cleanup
E)All of the above

Question 13

Which of the following creates a negative externality in consumption?

A)Polluting a river
B)Playing loud music
C)Vaccinations
D)Reducing the cost of producing of another good
E)Strip mining

Question 14

When the cost of an action falls on other than the person (or persons)responsible for the action,which of the following exists?

A)Positive externality
B)Negative externality
C)Externality in consumption
D)Externality in production
E)External cost

Question 15

If all benefits from consuming a good go to consumers,the demand curve is the same as the

A)MPC curve
B)MSC curve
C)MPB curve
D)Supply curve
E)Benefit curve

Question 16

Human production processes do not include which of the following services?

A)Mineral deposits,such as coal and iron
B)Renewable resources,like timber and plant products
C)Technological advances in production
D)Recycling of waste materials,such as chemical wastes
E)All of the above

Question 17

When MPC is less than MSC,

A)Firms will tend to produce more than is socially optimal
B)The price of the product will be higher than the competitive price
C)The firm must be a monopolist
D)The firm will produce less than is socially optimal
E)There are positive externalities in production

Question 18

Marginal private cost (MPC)always includes:

A)The price of a good in the market
B)The extra costs of production of one more unit of a good
C)The additional benefits received by consumers from the consumption of the good
D)The costs imposed on society from pollution
E)The expenditures by government to control negative externalities

Question 19

Pollution

A)Like air and water pollution became an issue in the U.S.during the 1960's
B)Tends to be worse in more populated than in less populated areas
C)Occurs because large portions of the environment are owned by polluters
D)Increases the cost of producing all goods
E)Issues are represented in all of the above answers

Question 20

Complete elimination of pollution is economically rational when

A)Pollution is associated with illness in humans
B)For each unit of pollution,the cost of clean-up is less than the benefit from its elimination
C)The pollution will likely affect future generations
D)MSC of cleanup < MSB of cleanup
E)None of the above; complete elimination is never rational

Question 21

Pollution should be completely eliminated

A)When the marginal social benefit of control is greater than or equal to the marginal social cost of control for all units of pollution
B)When the marginal social cost of control is zero
C)At no time,from an economic perspective
D)All of the above
E)(a)and (b)

Question 22

The Following Questions Refer to the graph below.
Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are positive social spillovers associated with the production of Z:

A)Government should levy a per unit tax on Z to shift the supply curve toward S₁
B)An output greater than 0G would improve resource allocation
C)Government should levy a per unit tax on Z to shift the demand curve toward D₁
D)An output smaller than 0G would improve resource allocation
E)Both (a)and (d)

Question 23

The Following Questions Refer to the graph below.
Assume that the current market demand and supply curves for Z are D₁ and S₁ and there are positive social spillovers associated with the production of Z.Which curve could represent the MSC curve for Z?

A)D₁
B)D₂
C)S₁
D)S₂
E)None of the above

Question 24

The Following Questions Refer to the graph below.
If "Z" is pollution control,which of the following shifts illustrates the effect on the market for pollution control if new technology to control pollution is developed?

A)D₁ to D₂
B)D₂ to D₁
C)S₁ to S₂
D)S₂ to S₁
E)None of the above

Question 25

Costs incurred by the producer to buy or hire resources are called

A)Implicit costs
B)Explicit costs
C)Opportunity costs
D)Total costs
E)Marginal costs

Question 26

The Following Questions Refer to the graph below.
Operating at which point on the PPC TT₁ will result in the most environmental degradation?

A)T
B)T₁
C)T₂
D)A₁
E)A₂

Question 27

The Following Questions Refer to the graph below.
Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are negative social spillovers associated with the production of Z,

A)Government should levy a per unit tax on Z to shift the supply curve toward S₁
B)An output greater than 0G would improve resource allocation
C)Government should levy a per unit tax on Z to shift the demand curve toward D₁
D)An output smaller than 0G would improve resource allocation
E)Both (a)and (d)

Question 28

An upstream paper mill pollutes water used by a downstream water bottling plant,forcing the latter to clean the water it uses.Which of the following is true?

A)Both will over-produce
B)The paper mill will under-produce and the bottling plant will over-produce
C)The paper mill will over-produce and the bottling plant will under-produce
D)Both will under-produce
E)Neither will over-produce or under-produce

Question 29

Costs incurred by the producer for the use of self-owned resources are called

A)Implicit costs
B)Explicit costs
C)Accounting costs
D)Total costs
E)Marginal costs

Question 30

The Following Questions Refer to the graph below.
Assuming that the economy is operating on the PPC TT₁,the benefit of increasing pollution is shown on the graph as a movement from

A)A₂ to A₁
B)C₂ to C₁
C)q₂ to q₁
D)TT₂ to TT₁
E)C₂ to 0

Question 31

The market output level tends to be socially optimal when

A)Demand equals supply in the market
B)All costs and benefits are private and MSB=MSC
C)There is neither a shortage nor a surplus of the product
D)There are externalities in production
E)There are externalities in consumption

Question 32

Another term for implicit cost is

A)Out-of-pocket costs
B)Explicit costs
C)Opportunity cost
D)Total cost
E)Marginal cost

Question 33

Which of the following is a factor leading to pollution?

A)People are inherently dirty
B)There are property rights to the environment
C)The environment is collectively consumed
D)The law of increasing returns
E)All of the above

Question 34

Payment by a firm to hire a worker is an example of a(n)

A)Implicit cost
B)Explicit cost
C)Opportunity cost
D)Total cost
E)Marginal cost

Question 35

The Following Questions Refer to the graph below.
Assume that the current market demand and supply curves for Z are D₁ and S₁ and there are positive social spillovers associated with the consumption of Z.Which curve could represent the MSB curve for Z?

A)D₁
B)D₂
C)S₁
D)S₂
E)None of the above

Question 36

The Following Questions Refer to the graph below.
Given the PPC TT₁,the cost of increasing pollution control from C₁ to C₂ is

A)A₁A₂ dollars' worth of other goods and services
B)Q₁q₂ dollars' worth of other goods and services
C)C₁c₂ dollars' worth of pollution control
D)Tq₁,dollars' worth of other goods and services
E)Unable to be determined without additional information

Question 37

The Following Questions Refer to the graph below.
Which of the following could explain a shift in the production possibilities curve from TT₁ to TT₂?

A)Over-utilization of pollution control activities
B)Better techniques of pollution control
C)Higher prices for other goods and services
D)Increased benefits from pollution control
E)Better technology for producing other goods and services

Question 38

The Following Questions Refer to the graph below.
If the discharge of the firm is q₁ units per day and a tax of T1 per unit is placed on polluted discharge,the firm will

A)Clean all of its discharge of wastes
B)Clean none of its discharge of wastes
C)Spend A₀B₀ dollars on cleaning the discharge
D)Spend A₀q₀ dollars on cleaning the discharge
E)(a)and (d)

Question 39

The Following Questions Refer to the graph below.
A technological advance that improves pollution control methods would cause which of the following changes on the graph? A movement from

A)A₁ to A₂
B)C₁ to C₂
C)q₁ to q₂
D)TT₁ to TT₂
E)0 to C₂

Question 40

The optimal level of pollution control occurs when

A)MSB of control equals MSC
B)Pollution is zero
C)MSB of control just exceeds MSC
D)MSB of control is less than MSC
E)None of the above

Question 41

The Following Questions Refer to the graph below.
What is the efficient quantity of the water-using firm's product?

A)Q₁
B)Q₂
C)Q₃
D)0
E)It cannot be determined

Question 42

The Following Questions Refer to the graph below.
A tax of T₁ per unit on polluted discharge will induce the firm to

A)Clean its discharge up to q₁ units per day rather than pay the tax
B)Pay the tax rather than clean discharge up to q₁ units per day
C)Clean its discharge exceeding q₁ units per day rather than pay the tax
D)Pay the tax on all units
E)(a)and (d)

Question 43

Following Questions are based on the following information.
In a small city located on a lake,the raw sewage of the city is dumped directly into the lakE.This has been a source of distress for citizens who like to swim,fish,and water ski.A study has been instituted to determine what value the citizens place on pollution control,and the results are listed in the following tablE.Costs of pollution control are also listed.

At the economically efficient level of control,MSB

A)Equals MSC
B)Equals $30,000
C)Is lower than at one unit less pollution control
D)Is higher than at one unit more pollution control
E)Is all of the above

Question 44

Following Questions are based on the following information.
In a small city located on a lake,the raw sewage of the city is dumped directly into the lakE.This has been a source of distress for citizens who like to swim,fish,and water ski.A study has been instituted to determine what value the citizens place on pollution control,and the results are listed in the following tablE.Costs of pollution control are also listed.

The marginal social cost of the fourth unit of pollution control is

A)Zero
B)$30,000
C)$90,000
D)$100,000
E)$120,000

Question 45

The Following Questions Refer to the graph below.
Given that the firm's demand and supply curves are D and S,respectively,which curve is the MSC curve for the polluting firm's product?

A)D
B)S
C)X₁
D)X₂
E)None of the above

Question 46

The Following Questions Refer to the graph below.
What is the equilibrium quantity of the polluting firm's product in a market with no pollution regulation?

A)Q₁
B)Q₂
C)Q₃
D)0
E)It cannot be determined

Question 47

The Following Questions Refer to the graph below.
A tax of M₀ per unit on polluted discharge will induce the firm to clean up

A)Q₁
B)More than q₁
C)Q
D)More than q but less than q₁
E)Zero

Question 48

The Following Questions Refer to the graph below.
What is the efficient quantity of the polluting firm's product?

A)Q₁
B)Q₂
C)Q₃
D)0
E)It cannot be determined

Question 49

The Following Questions Refer to the graph below.
Which curve is the MSC curve for the water-using firm's product?

A)D
B)S
C)X₁
D)X₂
E)None of the above

Question 50

The Following Questions Refer to the graph below.
Suppose the current tax is T₁ and the government wishes to allow less pollution.It should

A)Raise the tax above T₁
B)Lower the tax below T₁
C)Shift the MPC curve to the left
D)Shift the MPC curve to the right
E)Do none of the above

Question 51

Those who suffer from pollution may find it to their advantage to

A)Have the government enact legislation compelling the polluters to take antipollution measures
B)Bribe the polluters to control their pollution
C)Have the government tax pollution at a rate that increases with the amount of pollution generated
D)Do all of the above
E)Do none of the above

Question 52

The Following Questions Refer to the graph below.
Social well-being would be enhanced if output of the water-using firm were to

A)Increase from the equilibrium output
B)Decrease from the equilibrium output
C)Be equal to the equilibrium output
D)Be greater than Q₃
E)Be less than Q1

Question 53

Following Questions are based on the following information.
In a small city located on a lake,the raw sewage of the city is dumped directly into the lakE.This has been a source of distress for citizens who like to swim,fish,and water ski.A study has been instituted to determine what value the citizens place on pollution control,and the results are listed in the following tablE.Costs of pollution control are also listed.

The economically efficient level of pollution control is

A)10 units
B)9 units
C)8 units
D)4 units
E)2 units

Question 54

Following Questions are based on the following information.
In a small city located on a lake,the raw sewage of the city is dumped directly into the lakE.This has been a source of distress for citizens who like to swim,fish,and water ski.A study has been instituted to determine what value the citizens place on pollution control,and the results are listed in the following tablE.Costs of pollution control are also listed.

The marginal social benefit of the sixth unit of pollution control is

A)$495,000
B)$180,000
C)$80,000
D)$60,000
E)$40,000

Question 55

The Following Questions Refer to the graph below.
A tax of more than T₁ per unit on polluted discharge will induce the firm to clean up

A)Q₁
B)More than q₁
C)Q
D)More than q but less than q₁
E)Zero

Question 56

The Following Questions Refer to the graph below.
The value of well-being lost due to over-production of the polluting firm's product is equal to area

A)Acd
B)Abd
C)Deg
D)Dgf
E)This cannot be shown in the diagram

Question 57

Following Questions are based on the following information.
In a small city located on a lake,the raw sewage of the city is dumped directly into the lakE.This has been a source of distress for citizens who like to swim,fish,and water ski.A study has been instituted to determine what value the citizens place on pollution control,and the results are listed in the following tablE.Costs of pollution control are also listed.

As the units of pollution control increase,the MSB of controlling pollution is

A)Increasing
B)Decreasing
C)Constant
D)Harder to define
E)Impossible to determine

Question 58

The Following Questions Refer to the graph below.
What is the quantity of the firm's product in a market with no pollution regulation?

A)Q₁
B)Q₂
C)Q₃
D)0
E)It cannot be determined

Question 59

The Following Questions Refer to the graph below.
The value of well-being lost due to under-production of the water-using firm's product is equal to area

A)acd
B)abd
C)bed
D)deg
E)dgf

Question 60

The Following Questions Refer to the graph below.
Which curve is the firm's MPB curve?

A)D
B)S
C)X₁
D)X₂
E)None of the above

Question 61

If a pollution tax is placed on a firm emitting pollution,the firm will pay the tax,rather than reduce its emissions,as long as the tax is

A)Above its MPC of pollution control
B)Below its MPC of pollution control
C)Above the MSC of pollution control
D)Below the MSC of pollution control
E)Reasonable

Question 62

If Jim starts a landscape business and uses a truck and a tractor that he owns to perform landscaping projects,we can conclude that

A)The costs of the truck and the tractor are low
B)That the costs of the truck and the tractor are explicit costs
C)There is no cost to the business since he owns both the truck and the tractor
D)That the costs associated with both the truck and the tractor are implicit costs
E)He should ask his accountant how to handle the costs

Question 63

The use of pollution rights licenses can improve efficiency and reduce pollution since

A)Pollution rights licenses do not improve efficiency nor reduce pollution
B)The licenses give environmental groups pollution reducing permits
C)The cost to purchase these licenses means that social costs are

Question 64

Production and consumption in the cigarette market is too high because

A)Producers do not care about the health of their customers
B)MPC is greater than the MSC
C)MPB is greater than MSB
D)MSB is greater than MPB
E)MPB is less than MSB

Question 65

Requiring automobiles to pass emissions tests before being allowed on the road is an example of a(n)

A)Direct pollution control
B)Indirect pollution control
C)Pollution tax
D)Market solution to pollution
E)Positive externality in consumption

Question 66

Pollution rights markets

A)Have been shown to work in theory,but not in practice
B)Have never been used in the real world
C)Are used around the world,but not in the United States
D)Have been used to reduce sulfur dioxide emissions
E)Have not been effective in controlling sulfur dioxide emissions

Question 67

Direct or mandatory control imposed by government on polluters presupposes that the regulatory body can

A)Determine what the desirable limits of pollution are
B)Determine where the marginal costs of pollution are greatest
C)Enforce standards
D)B)and c)
E)All of the above

Question 68

When firms make decisions about output and about the amount of pollution that they produce,without government regulation

A)Firms only consider their private benefits and costs when making their choices
B)Firms choose not to pollute because it's bad for their public image
C)Social costs are always

Question 69

An advantage of direct regulation as a method of controlling pollution is that

A)The optimal level of pollution control can be easily determined
B)Pollution reduction quotas can be varied to remove pollution where it is least costly
C)Emission control standards can be enforced readily
D)Changes in the market are automatically

Question 70

A market for pollution rights is an efficient approach to pollution control because

A)It is cheap to implement
B)It leads to the complete elimination of pollution
C)It causes the pollution to be eliminated at the lowest cost
D)It is easy to enforce
E)None of the above

Question 71

Which of the following approaches would an economist propose to address industrial pollution of a river?

A)Ban all dumping of pollutants near or into the river
B)Limit each plant to a maximum amount of pollutant emission
C)Charge each polluter a fixed amount for each unit of pollutant dumped into the river
D)Direct pollution control regulation
E)Command and control pollution regulation

Question 72

With tradable pollution licenses to control pollution,reductions in total pollution

A)Can be achieved by having government buy back some of the licenses
B)Can be achieved by having government sell more licenses
C)Requires the government to buy back all existing licenses and re-issue new licenses
D)Cannot be achieved
E)Is never economically optimal

Question 73

When pollution is not regulated in the market,polluting firms will

A)Under-utilize resources and charge high prices
B)Under-utilize resources and charge low prices
C)Use the appropriate level of resources,but charge high prices
D)Be very profitable
E)Over-utilize resources and charge low prices

Question 74

For a tax on pollution to be effective,it must be

A)Placed on the firm polluting
B)Greater than the cost of cleaning-up the pollution
C)Placed on the consumer
D)Less than the cost of cleaning up the pollution
E)Set at a reasonable rate

Question 75

Suppose the government imposes a tax on electric companies for each unit of sulfur they emit.Which of the following would NOT occur?

A)Higher prices for electricity
B)Lower prices for electricity
C)Electric companies shifting to low sulfur oil
D)A decrease in the amount of electricity produced
E)A shift to alternative energy resources

Question 76

If a pollution tax is placed on a firm emitting pollution,the firm will treat pollution,rather than pay the tax,as long as the tax is

A)Above its MPC of pollution control
B)Below its MPC of pollution control
C)Above the MSC of pollution control
D)Below the MSC of pollution control
E)Reasonable

Question 77

Pollution occurs when the environment cannot recycle all the waste dumped into it.

Question 78

The efficient level of pollution is zero only if the

A)Marginal cost of pollution control is zero
B)Marginal benefit of pollution control is zero
C)MPB of pollution control equals MSB
D)MPC of pollution control equals MSC
E)MPC of pollution control equals MPB

Question 79

Air pollution did not cause great concern until the last few decades.

Question 80

In a pollution rights market,

A)Firms buy licenses to pollute
B)Firms sell licenses to pollute
C)Environmental groups can reduce pollution by buying licenses to pollute
D)The government can determine the level of pollution by the number of licenses it issues
E)All of the above