Econ 240 quiz 1 and 2

The shapes of the marginal benefit and marginal cost curves indicate:

- as pollution is reduced, each additional unit brings fewer benefits - as pollution is reduced, each additional unit costs more and more to reduce

Given the government regulators operate in a world of poor information and are subject to political influence

- progressives view active government as both effective and necessary - conservatives seek an absolute minimum of government intervention

Negative externalities

-Arise unintentionally in the process of production -arise because of free access to common property

Which curve shifts and in which direction when the following events occur in the domestic car market? The U.S. economy falls into a recession

Demand decreases

In the social welfare function SW=Uai(Xai, w*P)+Ujo(Xjo, w*P), let P stand for pollution, with ai and jo both exposed. This SW function

Implies that a safety standard is called for

According to the law of demand, during a given period of time, the quantity of a good demanded

Increases as its price falls, ceteris paribus

From an economic point of view, the primary goal of environmental regulation is to

Internalize externalities

Free-market environmentalists have advocated eliminating many environmental regulations and then relying on lawsuits by injured parties to "internalize" externalities

True

Progressive economists argue that well-financed lobbying by the fossil fuel industry is a major obstacle to the resolution of the global warming issue

True

Which of the following is NOT true under efficiency?

You cant make anyone better-off without making someone worse-off

Which of the following is an example of a positive externality that stems from consumption?

You plant new flowers in your yard that others in the neighborhood enjoy seeing when they pass

you can tax credits or subsidies from Colorado state government if you install solar panels on your roof. this is an example of

incentive-based regulation

A potential Pareto improvement requires that the winners from an economic change compensate the losers so that the outcome is a win-win

False

Demand is downward sloping due to diminishing returns in production, while supply is upward sloping due to diminishing returns in consumption

False

_________is the key characteristic that leads to a "free-rider problem"

Non-excludbility

In the presence of a negative externality, the private market will typically______if left on its own

Produce more than the socially optimal quantity

Each of the following will generate a market failure EXCEPT

Scarcity

Which of the following is an example of a normative economic question?

Should we regulate greenhouse gas emissions more?

Which of the following is NOT a determinant of demand?

Technology

Positive economic questions are__________ while normative economic questions are____________.

Testable; Subjective

From a utilitarian perspective, preserving rain forests to protect biodiversity

should be pursued if it increases overall human well-being

Which of the following are crucial assumptions that must hold for the Coase theorem to be effective?

well defined property rights and low bargaining costs