Ch. 13,14, Econ.

Sophisticated waste treatment plants can reduce organic pollution by up to ____ percent. - 75 - 25 - 99 - 95

99

When the market does not lead to an optimal allocation of resources, there must be - Too much regulation. - A market failure. - Proper antitrust laws in place. - A competitive market structure.

A market failure.

According to the text, which of the following is the prime cause of the greenhouse effect? - Carbon dioxide. - Carbon monoxide. - Sulfur dioxide. - Nitrogen oxide.

Carbon dioxide

Pollution control efforts - Are free of opportunity costs. -Increase external costs. -Reduce private marginal costs. -Change what and how much is produced.

Change what and how much is produced.

If Synergy Energy Corp. hires attorneys to keep it informed about new regulations, their salaries represent - Administrative costs. - Compliance costs. - Capital costs. - Efficiency costs.

Compliance costs

Which of the following markets has not been subject to substantial deregulation? - Airlines. - Computers. - Telecommunications. - Cable TV.

Computers.

Which of the following is not a regulatory option when the government is trying to prevent market failure in the case of a natural monopoly? - Cost regulation. - Profit regulation. - Output regulation. - Price regulation.

Cost regulation.

All of the following can be costs of environmental cleanup except -Fewer hospital visits. -The replacement costs of polluting machinery. -Layoffs of workers in polluting industries. -Scarce resources being used that then cannot be used to produce other goods.

Fewer hospital visits

External costs occur because - Private costs do not reflect the full costs to society. - All costs are absorbed by the firm. - Firms make a choice other than the most cost-efficient production method. - Government failure increases costs for the firm.

Private costs do not reflect the full costs to society.

External costs are - Effects of government on the private sector. - Outside costs that producers absorb. - The difference between social and private costs. - Domestic economic impacts of foreign events.

The difference between social and private costs.

Prior to the deregulation of the railroad industry, there was little incentive to invest in new technology or equipment. This is an example of - The failure of deregulation. - The inefficiencies of regulation - Market failure. - The failure of laissez faire.

The inefficiencies of regulation

The optimal rate of pollution occurs where -The marginal benefit of pollution abatement is zero. -Pollution is reduced to zero. -MR = MC for the production of the good that produces pollution. -The marginal benefit equals the marginal cost of pollution abatement.

The marginal benefit equals the marginal cost of pollution abatement.

Many economists would argue that - The market mechanism can handle pollution without any government intervention. - All pollution should be eliminated. - Central planning is the most efficient way to eliminate pollution. - The optimal amount of pollution is greater than zero.

The optimal amount of pollution is greater than zero.

When private and social costs are equal, - There is no opportunity cost. - Government failure occurs. - Market failure occurs. - There are no external costs.

There are no external costs.

When external costs are present, - There is market failure. - Private costs are greater than social costs. - There is government failure. - The market conveys the full costs of production

There is market failure.

The case for deregulation rests on the argument that - Government imperfections are worse than the market imperfections they were designed to cure. - Public goods are best provided by laissez faire. - Economies of scale are better achieved with the invisible hand. - Regulation is desirable and efficient, but a laissez-faire approach is more equitable.

Government imperfections are worse than the market imperfections they were designed to cure.

Government failure occurs when - Dealing with a natural monopoly. - There is market power. - Government intervention fails to improve economic outcomes. - Public goods are present.

Government intervention fails to improve economic outcomes.

When there is market failure - Government intervention is always beneficial. - A laissez-faire approach is the best policy. - Government intervention is beneficial only in the case of natural monopolies. - Government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost.

Government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost.

If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination, the monopolist would - Lose money and go out of business. - Earn only normal profits. - Earn economic profits. - Earn less profit than before, but still earn a profit.

Lose money and go out of business.

If a firm that pollutes wants to maximize profits, it will produce where -Marginal revenue and private marginal cost are equal. -Social benefits exceed social costs. -Private and social costs are equal. -The social value of production equals the social cost of production.

Marginal revenue and private marginal cost are equal.

Economies of scale refer to the - Reduction in minimum average costs due to an increase in the number of workers hired. - Reduction in minimum average costs due to an increase in plant size. - Downward-sloping portion of the marginal cost curve. - Downward-sloping portion of the average total cost curve

Reduction in minimum average costs due to an increase in plant size.

Regulations that offer imperfect answers - Are options that should never be implemented. - Reflect the realistic choices that society must make between imperfect markets and imperfect government intervention. - Are not consistent with utility maximization in the real world. - Will always have costs greater than their benefits

Reflect the realistic choices that society must make between imperfect markets and imperfect government intervention.

What development turned the cable TV market into a contestable one? - Economies of scale. - Satellite and broadband technology. - Cable TV firms raised prices. - Cable TV firms were earning economic profits.

Satellite and broadband technology

If a natural monopoly was broken into several smaller competing firms, - Consumers would lose because of less competition. - Producers would be better off because they would have greater market share. - Society would be worse off because the economies of scale would be destroyed.

Society would be worse off because the economies of scale would be destroyed.

The command-and-control strategy for pollution reduction refers to - Gradual development of standards through close monitoring of environmental changes. - The use of tradable permits. - Standards used to reduce pollution. - Material recycling.

Standards used to reduce pollution.

Before deregulation of the telephone industry, - Telephone service prices were lower than after deregulation. - Cutthroat competition eliminated profits. - The volume of communication was lower than after deregulation. - There were greater variety and quality of service than after deregulation.

The volume of communication was lower than after deregulation.

Emission charges, user fees, and pollution fines increase the _______ of polluting. - optimal rate - external costs - market failure - opportunity cost

opportunity cost

Which of the following industries was substantially deregulated over the last several decades? - Autos. - Cinemas. - Textiles. - Airlines.

Airlines.

A power plant in Illinois produces electricity by burning coal. This results in acid rain that kills trees and wildlife in New York. This is an example of - Inequity. - A private cost. - An external cost. - A public bad.

An external cost.

If government failure did not exist, - Laissez faire would apply to all markets. - Deregulation would be unnecessary. - The invisible hand would be the most efficient and equitable way to run the economy. - All markets would be regulated.

Deregulation would be unnecessary.

The marginal cost to society of reducing pollution increases as the level of pollution reduction increases because of the law of - Diminishing returns. - Diminishing marginal utility. - Demand. - Increasing externalities.

Diminishing returns.

Which of the following is a market incentive to discourage pollution? - Command-and-control options. - The greenhouse effect. - User charges and government regulation. - Emission charges and user charges.

Emission charges and user charges.

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 reduced pollution through - Central planning. - Command-and-control regulatory standards. - Pollution fines. - Emission charges.

Pollution fines.

Proponents of electric utility industry deregulation argue that - Profit regulation resulted in increased costs and higher prices. - Profit regulation resulted in too much investment in highly efficient energy production. - Profit regulation resulted in industry output that was too great. - Regulation of electricity producers favored industrial electricity users

Profit regulation resulted in increased costs and higher prices.

Cross-subsidization occurs when - Profits on one product are used to subsidize low prices on another product. - The government subsidizes production of a product. - Profitable firms in an industry are forced to share their profits with the unprofitable firms. - Firms are required to subsidize government research and development that may benefit their industry.

Profits on one product are used to subsidize low prices on another product.

The first major regulatory target in the United States was - Airlines. - Railroads. - Trucking firms. - Telephone companies.

Railroads.

Excessive process regulation may - Encourage cost-saving innovation. - Raise the costs of environmental cleanup. - Cause market failure. - Reduce pollution most efficiently.

Raise the costs of environmental cleanup.

The primary purpose of tradable pollution permits is to - Reduce the cost of pollution control. - Completely eliminate pollution. - Reduce the level of pollution to optimal levels. - Eliminate private costs.

Reduce the cost of pollution control.