7. Pollution is regarded as a form of market failure because:
a. firms fail to respond to regulatory controls imposed by the government.
b. the market cannot be used to tackle the problem of pollution.
c. market prices sometimes rise or fall.
d. the market does not always reflect the true costs of economic behavior.
7. Pollution is regarded as a form of market failure because:
a. firms fail to respond to regulatory controls imposed by the government.
b. the market cannot be used to tackle the problem of pollution.
c. market prices sometimes rise or fall.
d. the market does not always reflect the true costs of economic behavior.
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Related questions
Question 1:
The annual income that can be consumed without diminishing the total capital assets of a nation is
purchasing power parity income. |
sustainable national income. |
environmental capital stock. |
per capita income. |
Question 2:
Maintaining the rainforest is very important because
of its absorptive capacity for CO2 emissions. |
of maintaining agricultural production of countries dependent on the rainforest such as Brazil. |
ensuring a successful land reform policy. |
encouraging rainforest settlement of the poor |
Question 3:
Which of the following leads to an underallocation of resources to a specific economic activity?
External benefits |
Marginal costs |
External costs |
Marginal benefits |
Question 4:
The free-rider problem plagues public goods because
once public goods are produced it is not possible to exclude anyone from consuming these goods. |
the public doesn't care about public goods. |
public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society. |
policymakers ignore opportunity costs in making decisions |
Question 5:
Which of the following methods could be used to correct for external costs?
Require firms in the industry to install pollution control devices. |
Impose a tax or an effluent fee on the offenders. |
Have the offender clean up the pollution it caused. |
All of the above would be appropriate. |
Question 6:
To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if
the economic damages are zero. |
the administrative costs are high. |
the cost of ascertaining the actual economic costs are relatively small. |
the economic damages associated with the pollution are different across different locations. |
Question 7:
In order to internalize the externality due to pollution, the government should impose a tax based on
the size of the firm causing the pollution. |
the physical amount of pollution. |
the value of the pollution-causing business activity. |
the economic damage associated with the pollution. |
Question 8:
In a market for emission permits, firms that emit over their allowed limits
pay a price of these emissions. |
are forced to shut down. |
are taxed by the government for the amount of emissions. |
receive a subsidy for the amount of emissions. |
Question 9:
The 1997 Kyoto Protocol was signed by
more than three dozen nations. |
all nations in the world. |
only the United States and the European Union. |
only nations in Asia. |
Question 10:
The problem of overfishing in waters that are commonly owned can be solved by
subsidizing fishing. |
establishing property rights for fishing in the waters. |
the use of the Coase Theorem. |
allowing the market to ration fish. |
Question 1
An externality
enhances market efficiency. |
||
is a private cost or benefit that results from the production or consumption of a good or service that is external to a market. |
||
is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service. |
||
refers to production or consumption that occurs outdoors. |
5 points
Question 2
Externalities can be produced by:
the high price of goods and services |
||
individuals; firms |
||
market prices; market incomes |
||
oceans; streams |
5 points
Question 3
When an external cost exists that is NOT taken into account in the production of a product,
the level of output is too high, and the supply curve should shift to the left to account for the externality. |
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the price of the product is too high, and production should be expanded to lower the price. |
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the level of output is optimal, and there should be no change in the supply curve. |
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the level of output is too low, and the supply curve should shift to the right to account for the externality. |
5 points
Question 4
Which of the following is correct?
MSC = MPC - MD |
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MPC = MSC + MD |
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MSC = MPC + MD |
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MD = MSC + MPC |
5 points
Question 5
If external costs (costs of cleaning up) are included and added to a firm's private costs, then
the demand curve will shift to the left. |
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the supply curve will shift to the right. |
||
the demand curve will shift to the right |
||
the supply curve will shift to the left. |
5 points
Question 6
The Coase Theorem states that
government intervention is always needed if externalities are present. |
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assigning property rights is the only thing the government should do in a market economy. |
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if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities. |
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a free-market equilibrium is the best solution to address externalities. |
5 points
Question 7
Buffalo in the United States almost became extinct while cattle, an animal that provides similar products, never have been close to extinction. The difference is due to
the use of private property rights on cattle and common property rights on buffalo. |
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the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of buffalo. |
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cattle existing in Europe also while buffalo were specific to North America. |
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the greater marginal value of a buffalo relative to a steer, leading to the overharvesting of buffalo. |
5 points
Question 8
In theory, the Emissions Fee would
cause firms to generate less pollution than their allowed limits. |
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raise the production costs of all firms. |
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cause firms to generate more pollution than their allowed limits. |
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lower the production costs of all firms. |
5 points
Question 9
A cap-and-trade policy
has a set number of permits. |
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allows polluters to trade permits. |
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caps the total level of pollution allowed. |
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all of the above. |
Question 10
A Pigouvian tax corrects for
market congestion. |
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market losses. |
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inefficient sales. |
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low market prices. |