AGEC 5090 MT 1

if the future net benefit from a resource received 3 years from today is 24 million and the discount rate is 6% then the present value of this net benefit is a. $2.718 mil b. $3.14 mil C. $20.15 miJ d. $24 mil e. $120 mil

20.15 million

a consumer has the following daily marginal willingness to pay for Coke 1st bottle 5 2nd 4 3rd 3 4th 2 5th 1.50 6th 0 how many bottles will the consumer buy at this price? a. 1 b. 2 C. J d. 4 e. 5 what is the consumer surplus from drinking coke per day a. $9 b. $10.50 C. $ 1 5.50 d. Depends on the consumer's income e. Cannot say as we don' t know the supply curve for Coca-Kola

5 10.50

superimposing the MAC and MD below what is the efficient level of pollution and the sum of total damages and total costs

E2 C+D

the open access eq. fpr an open access resource occurs at the poit where a. total revenue = total cost b. total social benefits are maximized c. total private benefits are maximized d. marginal revenue = marginal cost e.marginal revenue equals social costs

a

which of the following is considered a public good a. national defense b. food c.tennis courts d. gasoline e. private fishing rights

a

open access resources: a free market alloaction of an opeen resource (common property) leads to a.over-exploitation of the resource b. under exploitation c. sustainable management d. enrichment of the few

a.

the efficient market eq for a public good with different demand curves from each would require a. different prices for each consumer b. charging each consumer the total cost of the public good c. zero prices for each consumer d. the same price for each consumer

a.

18. If benefi t/cost analysis is either not available or not sufficiently reJiable (not enough data to calculate), what alternative analyses are available for evaluating environmental policies? a. Cost Efficiency Analysis and Impact Analysis b. Cost Efficiency Analysis only c. Impact Analysis only d. Scarcity rent analysis e. The benefit-cost analysis is the only way to evaluate environmental projects and policies

a. Cost Efficiency Analysis and Impact Analysis

35. Peanut butter. Amid the salmonella in peanut butter scare that has led to low sales of peanut butter, the Georgia Department of Agriculture, backed up by federal agencies, announces that ALL peanut butter plants are now salmonella free and guarantees zero risk of infection from peanut related products. a. Demand increases (MWTP increases: demand shifts up) b. Demand decreases (MWTP decreases: demand shifts down) c. Supply increases (MC decreases: supply shifts down) d. Supply decreases (MC increases: supply shifts up) e. Nothing happens to either supply or demand

a. Demand increases (MWTP increases: demand shifts up)

38. The efficient market equilibrium for a public good with different demand curves from each user would require: a. Different prices for each consumer b. Charging each consumer the total cost of the public good c. Zero price s for each consumer d. The same pric for each consumer e. Charging each consume r the same fraction of the total cost of the public good

a. Different prices for each consumer

37. Which of the following is considered a P.ublic go.Qd? a. National defense b. Food c. Tennis courts d. Gaso line e. Pr ivate fishing rights

a. National defense

24. Vegetables. The federal government increases irrigation subsid ies for vegetable production a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supply shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either suppl y or demand

a. Supply increases (MC decreases: supply shifts down)

24. All of the following are correct regarding the economic valuation of human life ECXEPT a. all U.S. health, safety, and environmental regulations can be justified as producing positive net benefit when measured using economic anaJysis including the value of life calculations. b. the economic valuation of life uses the reduction in the probability that some segment of the population could be expected to die earlier than otherwise due to environmental risk. c. the economic approach calculates the implied value of human life rather than the actual value of hum an life. d. life is not economically "priceless" because choices must be made about the use of scarce resources to prevent loss of life.

a. all U.S. health, safety, and environmental regulations can be justified as producing positive net benefit when measured using economic anaJysis including the value of life calculations.

2. Economics models--------- a. can be useful for creating solutions to environmental problems if the assumptions are accurate. b. are used as detailed representations that include all aspects of an environmental problem. c. are likely to produce the same conclusions about environmental issues despite changes in the model's assumptions. d. are always used by policymakers (the government) in deciding on environmental issues. e. are useless for environmental policymaking

a. can be useful for creating solutions to environmental problems if the assumptions are accurate

what is the standard economic technique t compare present and future benefits and costs a. discounting b. property rights c. microeconomics d. externalities e. macroeconomics

a. discounting

17. What is the primary goal of benefit/cost analysis for decision-making by many federal agencies? a. to choose the most economically feasible projects, given limited budgets. b. to create jobs. c. to protect the environment at any cost. d. to place a value on the damage done by environmental degradation. e. to put a $ amount on personal values of policy makers.

a. to choose the most economically feasible projects, given limited budgets.

suppose making paper creates pollution a negative externality in order to incorporate the externality in a supply - demand diagram we would

add the externality to the market supply curve

a firm that produced positive externalities a. overapplies the resources because the marginal social cost os above private costs b. underapplies resources because its marginal social cost is below marginal private cost c. should be shut down

b

which of the following is true a. pecuniary externality comes from lobbying efforts b.pecuniary externality is a spill over effect transmitted through prices and does not cause a market failure

b

which one of the following variables is most likely to decline as production effort in harvesting open access resource increases a. marginal costs b. marginal revenue c. total revenue d. total costs e. total production

b

what re the main characteristics of public goods a. nin rivalry in consumption and excludability b. non rivalry in consumption and see - excludability

b.

2. Which of the following statements is the most correct? a. History gives no clues as to whether soc ieties correctly adapt to solve problems of scarcity. b. History shows that, when faced with scarcity, societies can correctly adapt to solve the problem. c. . History shows that when faced with scarcity, societ ies never adapt to solve the problem. d. History shows that when faced with scarcity, societ ie s always correctly adapt to solve the problem. e. History shows that when faced with scarcity, societ ie s always increase consumption of the scarce resources.

b. History shows that, when faced with scarcity, societies can correctly adapt to solve the problem.

31. A firm that produces Jlll.Sitive externalities a. Should be shut down b. Underrnpplies the resource because its marginal social cost is below its marginal private cost c. Should be taxed by the amount of positive extema lity d. Oversupplies the resource because its marg inal soc ial cost is above its private cost e. Does not produce a market failure because the price reflects scarcity

b. Underrnpplies the resource because its marginal social cost is below its marginal private cost

46. The general result of the analys is of ope n access resources is that a. open access resources are underexploited b. open access resources are overexploited c. output is too low compared to socially efficient d. output is soc ia lly effici ent e. the price of an open acces s resource is too high

b. open access resources are overexploited

consumer surplus can be described by the area a. Be low the demand curve and above the marg inal cost for some given quanti ty. b. Below the demand curve for some g iven quant ity. c. Below the demand curve and above the price line for some given quantity. d. Below the margin al co st for some given quantity. e. Below the price line and above the margina l c;os t (s upp ly curve)

below the demand curve ad above the price line for some given quantity

total surplus can be described by the area a. Below the demand curve and above th9 T.argiaa! <;ost for some given quantity b. Below the demand curve for some given quantity c. Below the demand curve and above the price iine for some given quantity d. Below the marginal cost for some given quantity e. Below the price line and above the marginal cost (supply curve)

below the demand curve and above the marginal cost for some given quantity

the coase theorum states that a. property rights should be initially signed to those affected by a negative externality b. property rights should initially be assigned to those creating a negative externality c. as long as property rights are well defined and no transactions costs exist, an efficient allocation will result d. as long as the property rights are well defined and transaction costs are prohibitily high and fficient allocation will result

c

20. Which of the economic values is derived from motivation other than personal, for-profit, use? a. Present value b. Use value c. Nonuse value d. Option value e. Future value

c nonuse value

45. By how much has the water treatment cost increased for the 10 firms that were using the lake water before the 11th firm moved in? (In other words, what's the increase in the total costs of water treatment for the 10 original firms?) a. $30,000 b. $35,000 c. $50,000 d. $300,000 e. $335,000

c. $50,000

32. Which of the follow ing is true? a. Pecuniary externality comes from germs on dirty dollar bills b. Pecunia ry exte rna lity always com es from lobbying efforts. c. :Pecuniary exteruaJity is a spillover ef t transmitted through prices and does not cause a market failure (i.e., there is nothing to tax or subsidize). d. Pecuniary externality is not transmitted through the price. e. Pecuniary externality is transmitted through the price and does cause a market failure (i.e., should be axed or subsidized).

c. :Pecuniary exteruaJity is a spillover ef t transmitted through prices and does not cause a market failure (i.e., there is nothing to tax or subsidize).

26. Peanut butter. Amid the salmonella in peanut butter scare that has led to low sales of peanut butter, the Georgia Department of Agriculture, backed up by federal agencies, announces that ALL peanut butter plants are now salmonella free and guarantees zero risk of infection from peanut related products. a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supply shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down)

c. Demand increases (MWTP increases: demand shifts up)

27. Housing market. Per capita income rises by I 0%. Consider short-term (immediate) market impact. a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supply shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either supply or demand

c. Demand increases (MWTP increases: demand shifts up)

35. Which of the following correctly identifies one of the main characteristics of an efficient property rights structure? (pc y attention to the wording) a. Scarcity rent is the producer 5.urp lus that persists in a long-run competitive equilibrium. b. Transferability means that property rig hts sho uld be secure from involuntary seizure or encroachment by others. c. Exclusivity means that ali benefits and costs accrued as a result of owning and using the resources should accrue to the owner, and only to the owner, either directly or indirectly by sale to others. d. Enforceability means that all property rights should be transferable from one owner to another in a voluntary exchange. e. None of the above.

c. Exclusivity means that ali benefits and costs accrued as a result of owning and using the resources should accrue to the owner, and only to the owner, either directly or indirectly by sale to others.

36. What are the main characteristics of public goods a. Rivalry in consumption and non-excludability b. Non-rivalry in consumption and excludability c. Non-rival ry in consumption and non-excludab ility d. Rivalry in consumption and excluda bility e. Non-rivalry in con s umption negative consumption externalities

c. Non-rival ry in consumption and non-excludab ility

cotton: a new transgenic(genetically modified) cotton variety resistant to boll weevil and other major cotton pest5 has become available and is widely adopted by cotton growers. a. Demand increa ses (MWTP increases: demand shifts up) b. Demand decreases (MWTP decreases: demand shifts down) c. Supply increases (MC decreases: supply shifts down) d. Supply decreases (MC increases: supply shifts up)

c. Supply increases (MC decreases: supply shifts down)

34. Marginal damage (MD) from industry/pla nt emissions (of toxic substances) can be describe d as a function of the emissions. It is usua lly the case that, the higher the emissions, the more damage any additional (marginal) emissio ns cause. This marginal damage can be measured in $ (as costs compensating for whatever damages the toxic emissions cause). Below is a graph showing marginal damage (MD) as a function of emiss io ns. For emissions level E1, what is the total (not marginal) damage? a. a b. area A c. area B d. area A+B e.a*E1

c. area B

if a business generating polution is charged a tax per unit of pollution and demand stays same a. business forced to declare bankruptcy b. business raises its prices and produce more of polluting good c. business has to raise its prices and produce less of polluting good d. business is likely to invest in pollution reducing technology e. business lowers prices and produces less

c. businesshas to raise prices and produce less of polluting good

the standard economic approach to polution control a.requires reducing pollution by anet percentage b. allows polluting firm to operate without government regulation c. involves weighing the costs and benefits of pollution reduction d. places limits on allowable economic growth e. deals only with cumulative pollutants

c. involves weighing the costs and benefits of pollution reduction

in a supply and demand graph the socially efficient outcome occurs a. wher private marginal benefits equal the social marginal costs b. where the private marginal benefits equal the private marginal costs c. where the social marginal benefits equal social marginal costs d. where the social marginal benefits equal the private marginal costs

c. where the social marginal benefits equal the social marginal costs

if steel producers pay a tax on production

consumer surplud declines

if benefit - cost analysis is either not available or not sufficiently reliable what alternative analysis are available for evaluating environmental policies

cost efficiency analysis and impact analysis

which of the following is not a conclusion about market allocations of commodities that cause pollution externalities in unregulated markets a. too much pollution is produced b. output of the commodity causing pollution is too large c. situation can be corrected by a tax on production d. the prices of products responsible for pollution are too high compared to the socially optimal

d

23. Bottled water. Media is airing the news that bottled water quality is hardly better (if not worse) than that of tap water. a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supply shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either supply or demand

d. Demand decreases (MWTP decreases: demand shifts down)

28. Printers. Price of an ink cartridge doubles. a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases : supply shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either supply or demand

d. Demand decreases (MWTP decreases: demand shifts down)

29. iPods. The price of a single song on iTunes rises by 100% (say from $.99 to $1.99). a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supply shift s up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either supply or demand

d. Demand decreases (MWTP decreases: demand shifts down)

25. Chicken meat. CNN and other news channels repeatedly air documentaries showing horrid and cruel conditions at industria l chicken farms. a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supp ly shifts up) c. Demand increases (MWTP increases: demand shift s up) d. Demand decreases or stays the same (MWTP decreases: demand shifts down) e. Both demand and suppl y increa se

d. Demand decreases or stays the same (MWTP decreases: demand shifts down)

39. Which of the following is considered a common property (open access) resource? a. Cars b. Power plants c. Ligh tho uses d. Open ocean fishery e. National defense

d. Open ocean fishery

40. A free market allocation of a common property (open access) resource leads to a. Sustainable management b. Unde r-exploi tation of the reso urce c. Gain in scarcity rent and under-exploitation of the resource d. Over-exploitation of the resource e. Enric hme nt of the few

d. Over-exploitation of the resource

positive economics is about a. describing what is, was, or will be, without making value judgments b. describi ng w hat ought to be, whether we should do it or not c. focusing on the positive impact s of economic activities d. answering the question of whether international trade is desirable e. defending international trade

describing what is, was, or will be, without making value judgements

suppose a home owner decides not to participate ina neighborhood cleaning but his/her property values increase as a cleaner neighborhood. this is an example of a. transaction costs b. holdout effect c. free market enviromentalism d. public choice e. free riding

e.

21. If the future net benefit from a resource received 5 years from today is $24 billion and the discount rate is 6% then the present value of this net benefit is a. $2.718 bil b. $24 bi] C. $120 bil d. $3.14 bi] e. $17.9 bil

e. $17.9 bil

30. Which of the following is not a conclusion about market allocation s of commodit ie s that cause pollution externalities in unregulated market s? a. Too much pollution is p roduced b. The output of the commodity causing polluti on is too large c. The situat ion c a n be corrected by a tax on production of the "dirty"/polluting commo dity d. The prices of products responsible for pollution are too lo w compared to the socia l optimum e. The prices of products responsible for pollution are too high compared to the social optimum

e. The prices of products responsible for pollution are too high compared to the social optimum

33. Marginal Abatement Cost (MAC) for industry /plant emissions (of toxic substances) can be described as a function of the emissions. Marginal abatement cost shows how much it would cost the industry/plant to reduce emissions by 1 unit given it current emission level (i.e., MD at E2 equals a). It is usually the case that, the higher the emissions, the less it costs to reduce them by 1 unit (at the margin). Below is a graph showing Marginal Abatement Cost (MAC) as a function of emissions. For reducing the emissions level from E1 to E2, what is the total (not marginal) Abatement Cost? a. a b. area A c. area B d. area B+C e. area C

e. area C

if producing a good generates pollution and nothing is being done about it then from a social perspective a. price too high quantity produced too low b. price too high quantity produced too high c. price too low quantity produced d. price too low quantity produced too low e. price too low quantity produced too high

e. price too low quantity produced too high

as a method for evaluating benefits and costs for multiyear projects present value calculations a. generate comparable t>,stimates of net benefits that are received in different time periods. b. determine the discount rate of future benefits. c. determine net benefits of a project over a short period oft ime. d. alleviate the need to look at benefits across different time periods. e. ge nera lly do not differ from the future value calculations.

generate comparable estimates of net benefits that are received in different time periods

which of the following most likely represents the aggregate demand $

graph with 15, 8, 7, 24

producer surplus is equal to a. Total Willingness to Pay minus the costs of production b. Total Willingne ss to Pay plus the costs of production c. Gross revenues (sales) minus total variable costs (MC for all output produced) d. Price minus total variable costs e. Total variable costs minus gross revenues (sales)

gross revenues(sales) minus total variable cost(MC for all output produced)

marginal willingness to pay is a. How much you are willin g to pay for the first unit of the good b. How much you are wi lling to pay for the second unit of the good c. How much you are willing to pay for the bundle of units consumed d. How much you are willing to pay for one more unit of the good e. Yo ur exp enditure: price times quantit y

how much you are willing to pay for one more unit of the good

marginal costs usually increase in output(for reasonably high volumes of output) because of the reasons except a. marginal product of labor (productivity) is declining b. wages increase as we need to hire more skilled workers c. land depreciates in value d. energy becomes more expensive as we need more of it e. physical inputs become more costly as we have to buy from more expensive suppliers

land depreciates in value

a competitive firm that is currently making profits should produce more output(expand) if: a. Price is greater than the fixed cost b. Fixed cost is higher than marginal cost c. Price is smaller than the marginal cost d. Price is greater than marginal cost e. Price is smaller than the sum of fixed and marginal costs

price is greater than marginal cost

which does not change the individual demand curve for a normal consumption good, at least not immediately a. Production costs b. Experience and learning c. Price of a substitute d. Price of a complement e. Fashi on, trends

production costs

why is scarcity rent important a. Without sca rcity rent, scarce resources would be too valuable b. Scarcity rent means that less efficient or lower quality resources will not be brought into production. c. Scarcity rent allows a return 10 scarce inputs owned by the producer in the short run. d. Scarcity rent allows a return to scarce inputs owned by the producer in the long run. e. Scarcity rent only exists in the short run.

scarcity rent allows a return to scarce inputs owned by the producer in the long run

in making environmental decisions private and social discount rates may differ because a. of arbitrage in the financial markets b. private decision-makers and social decision-makers agree on market outcomes. c. of the risk-free cost of capital. d. banks charge private individua ls the same int eres t rate as they charge social groups. e. social and private risk premiums differ.

social and private risk premiums differ

which is not a way to internalize a negative production externality

subsidize pollution

21. Peanut Butter. Peanut Corporation of America (PCA) processing facility in Blakely, Georgia is shut down after the Georgia Department of Agriculture begins investigating the plant as a soru c e of Salmonella poisoning. Other plants are fir.e and no one expects salmonella in peanut butter a. Suppl y increases (MC decreases: supply curve shifts down) b. Supply decreases (MC increases: supply curve shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either supply or demand

supply decreases(MC increases supply curve shifts upward)

grapefruit juice: a cold snap in the central valley of california destroys large amounts of californias annual grapefruit harvest a. Supply increases (MC decreases: supply shifts down) b. Supply decreases (MC increases: supply shifts up) c. Demand increases (MWTP increases: demand shifts up) d. Demand decreases (MWTP decreases: demand shifts down) e. Nothing happens to either supply or demand

supply decreases(MC increases, supply shifts up)

marginal cost is a. total variable costs divided by output (number of units produced) b. costs that are independent of how many units you produce c. the maximum value of other outputs we could and would have produced had we not used the resources to produce the item in question d. the cost associated with producing one more unit of the good (above certain quantity already produced) e. costs of a firm that is too small for its actions to affect market prices

the cost associated with producing one more unit of the good( above certain quantity already produced)

which one of the following relationshios is usually included in the standard circular model of an ecnomy a. the flow of pollution from firms to households b. the flow of goods and services from firms to households c. the flow of money from households to firms d. the flow of wages from firms to households e. the flow of labor from households to firms

the flow of pollution from firms to households

assuming the coase theorum applies the efficient allocation of a resource will result

through negotiations between the parties involves

the costs of conducting a negotiation are called

transaction costs

thoms malthus suggests that population growth a. History gives no clues as to whether soc ieties correctly adapt to solve problems of scarcity. b. History shows that, when faced with scarcity, societies can correctly adapt to solve the problem. c. . History shows that when faced with scarcity, societ ies never adapt to solve the problem. d. History shows that when faced with scarcity, societ ie s always correctly adapt to solve the problem. e. History shows that when faced with scarcity, societ ie s always increase consumption of the scarce resources.

would eventually lead to starvation and death as it exceeded the lands potential to produce food

does enviromental economics view the economy an open system a. No b. Yes c. Depends on how degrade d the environment is d. Depends on whether the economy relies entirely on renewable energy e. Depends on whether part of the waste is recycled

yes