Chapter: Externalities, the Environment and Natural Resources
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1. Contrary to most thinking, governments play _____ in causing pollution.
a. almost no role
b. a large but decreasing role
c. a major role
d. a reconstructive role
2. One of the conclusions of A. C. Pigou was that
a. a system of mandatory controls is the only effective means to control pollution.
b. a system of charges can be an effective means to control pollution.
c. pollution will wither away if a socialist system is in place.
d. pollution cannot be adequately addressed in a price system
3. China, the last large communist society,
a. has proved that a command economy has far less pollution problems than capitalist economies.
b. has urban smog levels much higher than in Los Angeles.
c. has the world's most sophisticated pollution-control devices.
d. has lowered its level of pollution dramatically since 1980.
4. If a market system is allowed to operate efficiently,
a. there will be zero pollution.
b. there will be a massive increase in pollution.
c. the cost of pollution cleanup will rise.
d. there will be an optimal amount of pollution.
5. The position of the supply curve in the market for garbage removal
a. is irrelevant since the cost is fixed.
b. depends on the marginal cost of garbage removal.
c. depends on the demand for garbage removal services.
d. is unaffected by taxes levied per household amount of garbage.
6. Taxes on polluting firms
a. have been tried, but not successfully.
b. have been successful in Germany in reducing water pollution.
c. have resulted in bankruptcy of the affected firms.
d. have never been tried to see if they work.
7. Direct controls which impose equal percentage reductions in emissions on all firms in the area
a. impose the same costs on all firms.
b. minimize the cost of pollution reduction.
c. penalize firms that have already incurred some costs to reduce pollution
d. are the fairest way to distribute the burden.
8. Many states charge a 10-cent deposit on every can of soda sold. A purchaser pays an extra 10 cents per can and will get his money back by returning the empty can to a store. This policy encourages recycling by
a. increasing the supply of recyclable materials.
b. shifting in the demand curve for canned soda.
c. raising the opportunity cost of discarding empty cans.
d. taxing the production of canned soda.
9. Among the factors that might lead to a divergence from the path of prices for a depletable resource predicted by the Hotelling model are: (i) unexpected discoveries of new reserves; (ii) new technologies which reduce extraction costs.
a. i and ii
b. i not ii
c. ii not i
d. neither i nor ii
10. Rising prices for a natural resource stimulate
a. the development of complements for the resource.
b. the development of substitutes for the resource.
c. the development of externalities from the resource.
d. All of the above are correct.
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