Question 1

The Framework Convention on Climate Change took place in

Accepted Answer

The Framework Convention on Climate Change refers to the United Nations Framework Convention on Climate Change (UNFCCC) that was signed in 1992 during the Earth Summit in Rio de Janeiro. The Kyoto Protocol, on the other hand, was adopted in 1997 as an international treaty within the UNFCCC framework. Therefore, the correct choice is C.

Question 2

In a market for emission permits, firms that emit over their allowed limits

Accepted Answer

In a market for emission permits, firms that emit over their allowed limits have to pay a price for these emissions. This price serves as a penalty for not staying within the permitted emission limits. The goal of the system is to incentivize firms to reduce their emissions to the permitted levels or even lower to avoid paying the price.

Question 3

A resource that is a common property is

Accepted Answer

Water in a publicly owned river is a common property resource because it is not owned by any individual or organization, but rather is a shared resource for public use. The other options all involve resources that are owned and controlled by specific companies or entities.

Question 4

In the Kyoto Protocol, participating nations agreed to

Accepted Answer

The Kyoto Protocol required participating nations to reduce their overall emissions of greenhouse gases between 1997 and 2020 to as much as 20 percent below 1990 levels. This was accomplished through a variety of measures, including trading carbon dioxide permits and buying greenhouse gas emission permits from developing nations, but the ultimate goal was a reduction in greenhouse gas emissions. Option B is incorrect because the deadline for eliminating all emissions of greenhouse gases was not until 2050, and option D is not a requirement of the Kyoto Protocol but rather a voluntary mechanism for offsetting greenhouse gas emissions.

Question 5

What is common property? What does common property have to do with externalities?

Accepted Answer

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Question 6

In order for a voluntary agreement to be reached in general, transaction costs should be

Accepted Answer

Transaction costs refer to the costs incurred in reaching an agreement, such as negotiation, drafting of contracts, and enforcement. If the transaction costs are high relative to the expected marginal benefits of the agreement, then it is unlikely that a voluntary agreement will be reached. On the other hand, if transaction costs are low relative to expected benefits, then it becomes more feasible to reach an agreement. Therefore, the best option is C. Option A, infinite transaction costs, would make any voluntary agreement impossible, while option D is irrelevant as determining transaction costs is not the role of the Environmental Protection Agency.

Question 7

Property owned by everyone (and thus no one in particular) is generally referred to as

Accepted Answer

Common property refers to property that is owned and managed by a group of people, without any one individual having exclusive ownership rights. Examples include public land, waterways, and the atmosphere.

Question 8

When property rights are clearly defined, there is generally a

Accepted Answer

When property rights are clearly defined, individuals or parties can negotiate and reach voluntary agreements regarding the use and allocation of the property. This eliminates the common property problem, where a resource is subject to overuse or depletion due to the lack of individual ownership or control. It also eliminates the need for a law or regulatory agency to enforce fairness, as agreements can be reached through negotiation and mutual agreement.

Question 9

Why are externalities associated with common property rather than private property?

Accepted Answer

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Question 10

Explain why the buffalo almost became extinct while cattle did not, even though both provide similar goods for people.

Accepted Answer

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Question 11

In a situation in which property rights are not well-defined and social costs exceed private costs, government can use all of the following to induce producers to bring private costs into alignment with social costs EXCEPT

Accepted Answer

Subsidization of production would actually exacerbate the problem by encouraging more production, increasing social costs even further. The other three options would all either directly or indirectly incentivize producers to internalize the social costs of their actions.

Question 12

Property that is owned by everyone and therefore by no one in particular is referred to as

Accepted Answer

Common property is a type of property that is owned collectively by a group of individuals or the general public, rather than by one specific person or entity. It is also sometimes referred to as public property. Social property is not a commonly used term and refers to property that is owned by a society or community. Private property is owned by an individual or entity, and commercial property is property that is used for business purposes.

Question 13

In 2005, the European Union began a program to

Accepted Answer

The program started by the EU in 2005 allows the trading of carbon-dioxide permits among firms to reduce greenhouse gas emissions. This is commonly known as the Emissions Trading System (ETS) which aims to incentivize firms to reduce their emissions by allowing them to trade or sell unused permits to other firms.

Question 14

For voluntary action to correct an externality,

Accepted Answer

If transaction costs are low, it becomes easier for individuals or groups to coordinate and negotiate towards correcting the externality. On the other hand, if transaction costs are high, it may be too costly or time-consuming for individuals or groups to take action, leading to the continuation of the externality. Therefore, low transaction costs increase the likelihood of voluntary action to correct an externality.

Question 15

Which type of property would be the most likely to experience pollution?

Accepted Answer

Common property is more likely to experience pollution due to the "tragedy of the commons," where individuals tend to overuse and deplete shared resources since no single person holds responsibility for its maintenance or preservation.

Question 16

Which of the following is NOT an example of common property?

Accepted Answer

Common property refers to resources that are owned and used collectively by a group or community, rather than by individuals. Air, gravity, and sunshine are examples of common property as they are available for all to use without individual ownership. A trampoline, on the other hand, is typically owned by individuals and not considered common property.

Question 17

The exclusive rights of ownership of property are generally referred to as

Accepted Answer

The exclusive rights of ownership of property are generally referred to as private property rights. These rights allow individuals to control, use and dispose of their private property as they see fit, without interference from the government or other individuals.

Question 18

All of the costs associated with making and enforcing contracts are referred to as

Accepted Answer

The costs associated with making and enforcing contracts, such as legal fees, negotiation costs, and monitoring costs, are known as transactions costs. Therefore, option D is the correct choice. Option A, alternative costs, refers to the costs of choosing one option over another. Option B, opportunity costs, refers to the cost of forgoing the next best alternative. Option C, marginal costs, refers to the additional cost incurred by producing one additional unit of output.

Question 19

Suppose a large tree on Adam's property blocks Eve's view of the ocean. Adam accepts Eve's offer of $15,000 to cut down the tree. This is an example of

Accepted Answer

This is an example of internalizing externalities via voluntary agreements, as Adam and Eve have come to a private agreement in which the negative externality (blocked view) is internalized and compensated for by Adam.

Question 20

The costs associated with the negotiation and enforcement of an agreement are

Accepted Answer

Transaction costs refer to the costs associated with making an economic transaction, such as negotiating and enforcing agreements. These costs can include legal fees, administrative costs, and other expenses that arise from the process of reaching an agreement. Therefore, option C is the best choice. Option D (attorney fees) is also relevant, but it only represents a subset of transaction costs. Options A and B are not directly related to negotiation and enforcement of agreements.

Quiz 31: Environmental Economics