Full Test Bank Chapter.10 Liability Property Voluntary 8e

Chapter 10

Decentralized Policies: Liability Laws, Property Rights, and Voluntary Action

Multiple Choice Questions
 

1. When people can negotiate with each other to come up with mutually satisfactory ways to deal with environmental externalities with little or no involvement of the government this is referred to as ________. 
A. moral suasion
B. an incentive-based approach
C. a decentralized approach
D. a centralized approach

Difficulty: Easy

 

2. ________ suggest(s) that in the presence of an externality bargaining can achieve the socially efficient equilibrium regardless of the initial allocation of property rights. 
A. Liability laws
B. The Coase theorem
C. The legal doctrine of standing
D. The burden of proof

 
Difficulty: Easy.
 

3. Suppose both a chemical company and a commercial fishery operate on the same river. According to the Coase theorem the socially efficient level of emissions can be reached through bargaining between the two parties if ________ has the right to use the river. 
A. just the chemical company
B. just the fishery
C. either the chemical company or the fishery
D. the regulator

Difficulty: Easy.
 

4. When public goods are involved _____________ will not bring about efficient outcomes.

A. decentralized approaches

B. free riding

C. competitive systems

D. centralized approaches

 
Difficulty: Moderate

 

5. Goods that give the same level of pleasure as ordinary goods and involve less environmental damage in either their production, use, or disposal are known as ________. 
A. generic goods
B. luxury goods
C. green goods
D. environmental goods

Difficulty: Easy.
 

6. Liability laws are one of the ways to ________ an externality. 
A. internalize
B. eliminate
C. increase
D. privatize

Difficulty: Easy.

 

7. If the MAC and MD curves do not change based on who has the property rights,

A. multiple socially efficient equilibrium can be reached.
B. no socially efficient equilibrium can be reached.

C. a different socially efficient equilibrium will be reached dependent on who holds the rights to pollute.

D. the same socially efficient equilibrium will be reached independent of who holds the rights to pollute.

Difficulty: Moderate.

8.  Regardless of who has the property rights to environmental resources

A. net social gains are the same independent of who holds the property rights to pollute.
B. net social gains differ depending upon who holds the property rights to pollute
C. net gains accumulate to individuals, not society.
D. a socially efficient equilibrium offers no net gains because MAC will equal MD.

Difficulty: Moderate.

9. The Coase theorem states that social efficiency can be obtained through bargaining and

A. gains to each party involved will be identical regardless of who has the rights.
B.  gains to each party depend on the initial allocation of property rights.
C.  gains accumulate to society, not individuals.
D. a socially efficient equilibrium offers no net gains because MAC will equal MD.

Difficulty: Moderate.
 

10. The more ______ an environmental good is, the ______ likely property rights can be used to achieve the socially optimal level of emissions.

A. public; less
B. public; more
C. private; more
D.  both A.and C

Difficulty: Easy

11.  Refer to the Figure above. If the damaging firm is emitting at the uncontrolled emissions level and is required to compensate damaged firms and individuals, the amount of that compensation would be __________.

A. a
B. (a+b+c)
C. d
D.  (b+c+d)

 
Difficulty: Easy

12. Refer to the Figure above. If the damaging firm is emitting at the uncontrolled emissions level and is required to compensate damaged firms and individuals, the damaging firm has an incentive to

A. stop emissions entirely.
B. reduce emissions until total abatement costs are equal to total damages.
C. reduce emission to e*, where marginal damages are equal to marginal abatement costs.
D.  stay at the current level of emissions (e₁) and pay the damages.

Difficulty: Easy

 

13. Common law systems rely on court proceedings where claims and counter claims are adjudicated to determine damages and compensation. These proceedings can involve

A. a private party making claims of damages to private assets.
B. a private party making claims of damages to public assets.
C. a public agency claiming damages to public assets.
D.  all of the above.

Difficulty: Easy

14. The concept of strict liability means that

A. polluters will be held responsible for damages regardless of the situation.
B. damages will be interpreted strictly, and compensation will be the highest level determined.
C. there are strict laws that interpret responsibility even if the polluter is a group.
D.  penalties will be strictly assigned as incarceration.

Difficulty: Easy

15. Negligence is a form of common law that

A. holds polluters responsible regardless of whether they have taken steps to avoid damages.
B. holds polluters responsible only if they have not taken steps to avoid the damages.
C. holds polluters responsible for neglect of an asset.
D.  holds government accountable for neglecting to protect public assets.

Difficulty: Easy

16. Nonjoint liability means

A. that only one party caused the damages.

B. that only one party may be held responsible for the damages.
C. only one party can sue for damages.
D.  parties cannot be held liable for two different damages resulting from the same action.

Difficulty: Easy

17. In the U.S. courts, those seeking to be compensated for damages due to environmental pollution must

A. demonstrate that the emissions at issue caused the damages that are presented.

B. demonstrate that the emissions at issue came from the specific defendant.
C. file an action within a specified period of time (typically 2-3 years).
D.  all of the above.

Difficulty: Easy

18. Liability laws are an effective way to incentivize efficient pollution solutions when

A. relatively few parties are involved.

B. causal linkages are clear.
C. damages are easy to measure.
D. all of the above.

Difficulty: Easy

19. The success of compensatory laws rely on aligning the damages assigned to each polluter with

A. the marginal abatement costs.

B. the actual amount of injury they cause.
C. the amount of transactions costs.
D. the costs of clean up.

Difficulty: Easy

20. When a resource has no owner

A. it has no marketable value.

B. there is no need to protect the resource.
C. there is less incentive to see that it is not degraded in quality.
D.  all of the above.

Difficulty: Easy

21. The problem of misuse of many environmental assets is a result of

A. imperfectly specified property rights.

B. private ownership of most environmental assets.
C. public ownership of most environmental assets.
D. high transaction costs.

Difficulty: Easy

22. In order for a property rights approach to produce an efficient level of environmental pollution the following conditions must be met:

A. property rights must be well defined, enforceable and transferable.

B. there must be a system for efficient negotiation about property rights to be negotiated.
C. there must be a set of markets for environmental assets.
D. all of the above.

Difficulty: Easy

23. Transaction costs ________ with the number of parties involved.

A. do not vary directly

B. increase
C. decrease
D.  vary inversely

Difficulty: Easy

24. Environmental quality improvements are public good so we should expect ____________.

A. free riding

B. government failure
C. transaction costs
D. asymmetric information

Difficulty: Easy

25. The likelihood of free riding in the production of environmental quality increases

A. over time.

B. when the number of parties affected is large.
C. exponentially.
D. in command economies.

Difficulty: Easy

26. Nonjoint liability means

A. that only one party caused the damages.

B. that only one party may be held responsible for the damages.
C. only one party can sue for damages.
D.  parties cannot be held liable for two different damages resulting from the same action.

Difficulty: Easy

27. Because of the lack of markets, many countries have sought to develop an innovative property rights plan called

A. internalizing externalities.

B. the Coase Theorem.
C. payment for environmental services.
D. Comprehensive Environmental Response, Compensation and Liability Act.

Difficulty: Easy

28. An example of social forces that enable voluntary action to be effective is ____________.

A. moral suasion

B. informal community pressure
C. green goods
D.  both A and B.

Difficulty: Easy

29. Informal community pressure is considered informal because

A. the pressure is placed on community not the government, to stop polluting.

B.  no media attention is given to this type of action.
C. there are no statutes or legal means used to assert the pressure.
D. the pressure relies on the moral compass of the polluters.

Difficulty: Easy

30. The Emergency Planning and Community Right to Know Act (1986) and the Pollution Prevention Act (1990) require polluters to report toxic emissions in an attempt to leverage _____________ to fight pollution.

A. informal community pressure

B. asymmetric information
C. moral suasion
D. transaction costs

Difficulty: Easy

31. Production and consumption of green goods shifts the demand curve for fossil-based power _______________,

A. to the right

B.  to the left
C. steeper
D. flatter

Difficulty: Easy

32. Divestment in the stock of polluting firms, like fossil fuel companies,

A. is required by non-profit organizations

B. has reduced fossil fuel production by large oil companies

C. is modestly successful as an economic incentive

D. has reduced fossil fuel use by consumers

33. ISO14001 and LEED certification are examples of

A. green markets

B. programs supported by the Pollution Prevention Act

C. payments for environmental services (PES)

D. voluntary pollution reduction programs

34. What kind of decentralized policy does Greta Thunberg, the Swedish environmental activist, encourage?

A. moral suasion

B. liability rules

C. private property rights

D. environmental damage compensation

35. The Nature Conservancy relies on _________ to buy sensitive natural resources.

A. government funding

B. local taxes

C. voluntary contributions

D. a lottery

36. According to the Coase theorem, if property rights over the environment are clearly defined and negotiation is allowed, the level of effluent will be

A. equal among the user of the resource

B. efficient among the users of the resource

C. favorable to the larger, corporations using the resource

D. all of above