Externalities & Environment Ch16 Test Questions & Answers - Microeconomics Principles and Policy 14e | Test Bank by Baumol by William J. Baumol. DOCX document preview.
Indicate whether the statement is true or false. |
1. Although pollution is caused by a failure of the market, many economists believe that the best way to protect the environment is to utilize the price mechanism.
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2. Basic supply and demand analysis can be used to explain how externalities lead to environmental problems.
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3. When pollution emissions can be measured, taxation will tend to be more effective than any other method of controlling pollution.
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4. Externalities are benefits or damages conferred upon people who are directly involved in an exchange of a good or service.
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5. Unexpected discoveries of mineral reserves will ordinarily cause the price of these minerals to increase.
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6. Emissions permits allow polluters to pay for the right to pollute a specified amount.
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7. Centrally planned economies have historically been more damaging to the environment than capitalist ones.
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8. Centrally planned economies are able to cope with environmental pollution issues much better than capitalist countries.
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9. A pollution tax penalizes inefficient firms.
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10. Emissions permits might be called an allowance.
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11. Direct controls are considered inefficient because all firms are forced to pay the same costs.
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12. Economic theory predicts that the price of a depletable resource will rise as it becomes more scarce.
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13. The U.S. Environmental Protection Agency estimated that communities that use the “pay-as-you-throw” program generate almost 50 percent less waste than communities where fixed fees or taxes cover the cost of curbside trash pickup.
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14. Direct controls have traditionally been used heavily to control pollution in the United States.
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15. Rising prices of resources leads to inefficient resource use by industry.
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16. New discoveries of lead, zinc, and copper will reduce prices.
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17. In a free market, the quantity demanded will not exceed the quantity supplied of a resource, even if it is undergoing rapid depletion.
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18. Individuals and government have been contributors in harming the environment.
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19. One advantage of emissions permits is that they allow the government to choose the level of pollution reduction.
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20. The Army Corps of Engineers has been accused of acting on the basis of a so-called “edifice complex.”
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21. A failure of the pricing system has led to pollution.
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22. Price controls would ordinarily be used to increase rather than decrease prices of depletable resources.
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23. Cap-and-trade programs limit pollution by selling firms a fixed amount of permits to pollute.
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24. Voluntary programs, direct controls, and emissions taxes are all equally effective ways of controlling pollution.
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25. If not recycled, an input used in production ultimately winds up as a waste product.
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26. Externalities pose a market pricing system failure.
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27. The invention of new mining methods will affect price through the supply side.
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28. Economists believe that externalities can be remedied by market methods.
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29. Taxing firms that emit pollutants is one way to reduce pollution.
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30. When a resource is being depleted and becomes scarce, the market’s way of encouraging conservation is for the price of the resource to rise, without any government intervention.
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31. Direct controls may be a more expensive method in reducing pollution than emissions taxes.
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32. The production of smoke as a pollutant is a failure of the market system.
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33. Direct controls often require long legal proceedings before they can be effective.
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34. Centrally planned economies like China produce relatively little pollution.
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35. Economists believe it is feasible and desirable to reduce environmental damage to zero.
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36. Voluntary programs are dependable ways to protect the environment.
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37. Direct controls work only if the legal system imposes substantial penalties on violators.
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38. Pollution is a relatively new phenomenon.
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39. Direct controls have a clear advantage when a total ban is necessary.
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40. Dwindling resources encourage the development of substitute products.
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41. Economists generally consider the use of taxes as the most efficient way of solving pollution problems.
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42. One of the virtues of rising resource prices is they encourage innovation, especially the discovery of other more abundant resources.
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43. Recycling rates for aluminum, paper, and glass have been increasing in the United States.
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44. Economists use a resource’s price as an indicator of its relative scarcity.
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45. If a depletable resource is selling in a perfectly competitive market, its expected price will continue to fall over time. This makes it unprofitable for firms to seek out the resource and bring it to market.
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46. Increasing environmental awareness in the United States has occurred with increasing GDP, which has reduced concerns about basic needs.
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47. Rising prices will discourage consumption and encourage conservation.
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48. In the last three decades, air quality in American cities has improved.
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49. Price controls on resources generally lead to surpluses.
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50. Externalities can create a threat to environmental quality.
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51. Even if demand for a resource grows over time, ever-rising prices of the resource that result from its growing scarcity still discourage consumption.
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52. Increasing GDP generally causes increases in problems of waste disposal.
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53. Economic theory would suggest that rising oil prices would reduce the amount of oil exploration and extraction.
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54. Environmental problems occur exclusively in capitalist economies.
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55. Taxing pollution will encourage firms to reduce pollutants dumped in the atmosphere or in streams.
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56. The worst and most difficult to extract resources are used first.
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57. Pollution is an example of a negative externality.
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Indicate the answer choice that best completes the statement or answers the question. |
58. Who of the following has been prominently accused of acting on the basis of the “edifice complex”?
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59. The major problem with direct controls as an environmental protection measure has been
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60. According to economic theory, under perfect competition, the price of a depletable resource
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61. A “backstop resource” is a close substitute for a depletable resource that is available in almost unlimited supply but at a higher cost. Shale oil is a backstop resource for crude oil. Which of the following statements is correct?
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62. Regulations that strictly limit pollution
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63. Which of the following would not lead to more conservation?
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64. The use of pollution charges to reduce pollution confronts the problem of
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65. If the price of garbage removal rises, people will
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66. The environmental problems of China is not caused by
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67. If a resource is in fact becoming scarcer, then one should expect
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68. Which of the following could explain a fall over time in the price of the depletable resource bauxite?
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69. Taxes on emissions have
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70. In retaliation for U.S. support for Israel during the Arab-Israeli War, OPEC countries stopped selling oil to the United States. For the United States, this embargo caused the
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71. Many economists argue that the most efficient way to control pollution is to
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72. Under EPA regulations, a factory
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73. What is new about environmental problems today is
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74. Economists generally prefer to deal with emissions of pollutants
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75. During the Trump administration, environmental fines and prosecutions
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76. Following the sharp increases in oil prices in the United States caused by the OPEC oil embargo of 1973–1974, U.S. automakers started building smaller, more fuel-efficient cars. This development caused the
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77. By providing free garbage removal, a community
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78. Pollution taxes are intended to
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79. Which of the following statements is incorrect about Eastern Europe and the countries of the former Soviet Union?
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80. Which basic approach to environment policy may be the only workable solution in brief but serious emergencies that do not allow for time to plan and enact a systematic program?
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81. Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly soar to dangerous levels. The most successful policy in this case would be
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82. Forecasts of an inevitable exhaustion of essential natural resources are “simply beside the point” because higher prices (i) reduce quantity demanded; (ii) stimulate supply; (iii) stimulate alternative technology.
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83. The socialist countries of Eastern Europe have
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84. The price elasticity of demand for an exhaustible natural resource tends to
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85. Most prophecies of the imminent exhaustion of many natural resources have not come true because
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86. Empirical evidence indicates that imposing taxes on polluting emissions by firms
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87. The position of the supply curve in the market for garbage removal
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88. An unregulated paper firm that pours waste into a waterway
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89. Recycling in the United States in recent years
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90. Global warming of the past century, and especially in the past decade, is at least partly a consequence of human activities that have increased ____ in the atmosphere.
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91. Direct controls do not have a clear advantage where
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92. Environmental quality is
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93. The use of tax penalties to control pollution represents a
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94. Skeptics have been historically incorrect about
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95. Environmental damage
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96. Which fact about recycling is incorrect?
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97. Since World War II,
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98. Economists consider environmental pollution to be a(n)
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99. The effectiveness of direct controls on pollution depends on: (i) the budgets and enthusiasm of the regulatory bodies; (ii) sufficiently strong statutory penalties.
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100. Interest in environmental problems has intensified, perhaps because
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101. Direct controls
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102. Rising prices help control the process of resource depletion by
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103. Taxes on polluting emissions are
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104. Based on economic theory, which statement is incorrect regarding the causes of pollution?
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105. Pollution taxes are more efficient in cleaning up the environment than direct controls. What is not an advantage of direct controls?
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106. Direct controls
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107. Rising prices for a natural resource stimulate
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108. Identify the economist who first addressed the environmental problem in terms of externalities.
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109. Which of the following statements about waste disposal is not true?
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110. Pollution is an externality, this means
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111. Some politicians rally against using the market to reduce pollution because
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112. Environmentalists, politicians, and economists have different perspectives on what constitutes appropriate environmental policy. Which of the following statements was probably made by an economist?
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113. Which of the following observations is true?
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114. The British economist A. C. Pigou did not do which of the following?
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115. If the price of a depleting resource does not rise as anticipated, it may be because
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116. Among the factors that might lead to a divergence from the path of prices for a depletable resource predicted by the economic models are: (i) unexpected discoveries of new reserves; (ii) new technologies that reduce extraction costs.
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117. To protect the environment, governments in the United States have mainly used
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118. Under an emissions tax program, the government sets ____; under an emissions permits program, the government sets ____.
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119. Air quality in most U.S. cities has ____ since World War II.
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120. China, the last large communist society,
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121. Pollution problems
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122. One advantage about an emissions permit system is that
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123. Some of the newer pollutants that have appeared
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124. In a free market for depletable natural resources, any shortage where there is an excess of quantity demanded over quantity supplied must be
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125. Which of the following is an advantage to the pollution-rights approach to environmental quality?
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126. The supply curve of a depletable natural resource is usually
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127. 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 or her money back by returning the empty can to a store. This policy encourages recycling by
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128. Global climate change will not
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129. A market with an externality can
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130. An unexpected discovery of a new mineral deposit will cause the
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131. In contrast to the need for legal enforcement under a system of direct controls, a taxes approach
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132. The external costs of alcohol consumption are related to, among other things, death and injury related to auto accidents caused by drunk drivers. These costs have been estimated to be about 47 cents per ounce of alcohol consumed. Taxes on alcohol amount to 23 cents per ounce. This suggests that alcohol consumption is (i) greater than the efficient or optimal amount; (ii) should be reduced to zero to eliminate the externality.
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133. The external costs of cigarettes are related to the health problem smoking produces for both smokers and nonsmokers. One estimate places these costs at 29 cents per pack. Presently, sales and excise taxes on cigarettes average about 37 cents per pack. These estimates suggest that (i) cigarette consumption is below the optimal or efficient quantity; (ii) cigarette taxes should be reduced.
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134. The advantages of emissions permits over taxes is/are that
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135. Economists predicted that the price of a depletable natural resource would rise by about 15 percent. Actually the price fell 10 percent. What most likely happened?
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136. A tax on polluting emissions will
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137. The increase in world oil prices during the 1970s was
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138. One of the reasons that pollution problems are as large as they are is that
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139. Which is not an example of pollution?
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140. The government prefers a market-based approach to reduce firms’ emissions of a toxic gas but wants to make certain that no more than 1,000 cubic yards of the gas are ever emitted in a single day. The most efficient policy under these circumstances is likely to be a system of
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141. Depletable resource prices change over time depending on
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142. Prohibiting the use of “dirty” fuels by industry is an example of
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143. Taxes on polluting firms have
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144. The supply curve of a natural resource like oil has a positive slope because
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145. Serious environmental problems are
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146. Which of the following has also been called the command and control approach?
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147. When society relies on voluntarism to resolve environmental problems it
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148. A government currently uses price controls to hold down the price of zinc, an exhaustible resource. If price controls are removed,
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149. Which of the following could be called a virtue of raising prices of depletable resources? (i) It would discourage consumption and waste. (ii) It would stimulate more efficient use of resources. (iii) It would encourage innovation and discovery of alternatives.
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150. Contrary to most thinking, governments play ____ in causing pollution.
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151. Most economists agree that exclusive reliance on direct controls
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152. Concerns about environmental damages arise from
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153. Water quality in the United States has ____ in the past 25 years.
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154. Economic theory predicted that the price of a depletable resource would rise by 10 percent. In reality, the price fell by 5 percent. Which of the following events could explain this discrepancy?
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155. Many of the new pollutants to which the world has been subjected are
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156. Voluntary programs for reducing pollution
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157. Statistical studies suggest that the cost of direct controls for any target level of pollution is
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158. Direct controls that impose equal percentage reductions in emissions on all firms in the area
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159. Which of the following is most likely to reduce the consumption of an exhaustible natural resource?
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160. The tax approach may be favorable over a direct controls approach to pollution cleanup because
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161. Individuals, firms, and government agencies deplete clean water and clean air because
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162. What is true of depletable resources is that
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163. Voluntarism in recycling garbage
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164. The deregulation of oil pricing will
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165. As a resource becomes more scarce, we expect its price to
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166. If one adopts a pure free-market approach to depletable resources, then one can expect the price of resources to
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167. Direct controls are generally much more costly than emissions taxes because
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168. If timber prices are rising slower than the rate of interest then
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169. As a competitive economy uses its stocks of a depletable resource,
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170. The observed change in the reserves of copper, lead, and zinc between 1960 and 1990 was most likely caused by
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171. Which of the following statements is false?
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172. Which of the following is not part of the pollution problem?
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173. Direct controls work if
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174. An advantage emission taxes and permits have over direct controls is that the former
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175. One of the conclusions of A. C. Pigou was that
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176. Voluntarism includes methods for dealing with pollution that
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177. Which of the following environmental approaches is most appropriate when surveillance and enforcement is impractical?
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178. Which of the following is a main political objection against using the market to reduce pollution?
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179. The legal system imposes large financial penalties on firms caught violating Environmental Protection Agency guidelines. The EPA’s standards program is thus an example of a
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180. Economic theory posits that a resource that is finite and being depleted will rise in price continuously and demand will be reduced. In fact, a recent study, graphing the price behavior of lead, zinc, and copper found that until about 2007,
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181. Which of the following statements is not true?
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182. Taking advantage of the built-in-loophole in emission taxes implies
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183. In North Carolina, a car must pass an emissions test before it can be registered. The emissions test costs $20 per car. This system is an example of
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184. The share of the burden of an emissions tax on output borne by the consumer of the polluting output will rise as
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185. If one tracks the prices of critical metals, like lead, zing, and copper, one sees that
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186. Which of the following is an example of detrimental externality?
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187. If suppliers of garbage collection services charged the full costs of providing the service, the supply curve would
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188. Supply and demand analysis
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189. Steps taken to clean the environment may lead to
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190. Unregulated markets will tend to
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191. The use of chlorofluorocarbons in refrigerators and air conditioners is alleged to cause the destruction of the ozone layer that surrounds the earth and protects humans from ultraviolet radiation. Output of this substance has been restricted by a licensing system where producers have to bid in the open market for licenses to produce them in specified quantities. This is an example of dealing with externalities by
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192. In practice, taxes on emissions of pollutants have been found to
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193. The price of an exhaustible resource sold in a perfectly competitive market in which technology and consumer preferences do not change over time will tend to
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194. What is not true for a system of financial penalties for polluters?
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195. Requiring all firms to reduce emissions by the same percentage is
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196. At the interest rate r, the price of a depletable natural resource three years from the present (price in present = P) will be, everything else being equal, which of the following?
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197. The price of a depletable natural resource last year rose more than expected. The most likely explanation is that
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198. Under perfect competition, the price of a depletable resource whose cost of extraction is not changing must rise at
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199. Briefly and concisely define the following terms.
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200. Describe how a pollution-control authority might use an emissions permits system to reduce pollution. |
201. What has happened to resource prices in the twentieth century and what do they reveal about resource scarcity? |
202. How does the price system cope with depletable resources? |
203. What are the implications of the law of conservation of matter and energy for recycling and waste disposal? |
204. Discuss the role of individuals and governments in committing environmental damage. |
205. ”One of the failings of a market system is the damage to the environment. Pollution would not exist with a centrally planned economy.” Evaluate this statement. |
206. There is concern that CFCs, a chemical by-product of refrigeration, are destroying Earth’s protective ozone layer, leaving us more vulnerable to cataracts and skin cancer. Suppose each air conditioner creates 10 pounds of CFCs. The demand and supply of air conditioners follow:
What will be the free-market price and quantity, and what will be the price and quantity if the government forces suppliers to pay a $100 tax for each air conditioner produced? |
207. Why is it misleading to argue that emissions permits are a “license to pollute”? |
208. Why do most economists favor emissions taxes over direct controls as a pollution deterrent? |
209. Explain what a “cap and trade” program is and how it works. Does the United States have a cap and trade program? If so, is it successful? |
210. Voluntarism often has proved to be weak and unreliable. Does it still have a place in controlling activities that damage the environment? |
211. Compare market price and quantity of steel to socially optimal price and quantity if steel producers ignore soot emitted from their smokestacks. Use a graph to assist your explanation |
212. If a firm that emits a form of pollution is also a monopolist, is the firm more likely to be allocatively efficient when compared to a nonmonopoly polluter? Explain. |
213. What are the advantages of a tax system for pollution control? |
214. Why do polluting firms overproduce? Use a completely and correctly labeled graph to illustrate your answer. |
215. Define the following terms and explain their importance to the study of economics.
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216. How do rising prices slow resource depletion? |
217. Detrimental externalities like pollution are a shortcoming of the market mechanism. Do they occur in free market economies alone? Explain with examples. |
218. Explain why environmentally minded firms in a competitive industry will find it difficult to take environmental action. |
219. Explain why environmental damage would be classified as an externality. |
220. Explain some important situations where direct controls have a clear advantage over taxes. |
221. Will depletable resources such as oil, coal, and aluminum be exhausted if their prices are left to the market? |
222. Americans are creating an enormous amount of solid waste daily—over 4 pounds per person per day. How is the United States coping with this extraordinary problem? |
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Microeconomics Principles and Policy 14e | Test Bank by Baumol
By William J. Baumol