Microeconomics Midterm Exam 2 Prep

In the following figure, what is the value of the external cost imposed by the activity generating the negative externality? $10 $20 $25 $30

$10

When addressing environmental policy issues, which discount rate would likely lead to the MOST urgent action to be taken to reduce environmental damage? 1% 5% 10% 20%

1%

Which statement is TRUE with regards to the use of tradable permits for controlling carbon emissions? Firms with lower costs of pollution abatement will demand more tradable permits. The total amount of pollution would rise above the established cap if permit prices were set too high. Environmental groups that purchase tradable permits and do not use them will push the price of remaining permits lower. Advancements in abatement technology will lead to a decline in the price of tradable permits.

Advancements in abatement technology will lead to a decline in the price of tradable permits.

Which of these is NOT an example of asymmetric information when dealing with health care issues? An obese person refuses to admit that he has a weight problem. A patient does not disclose her unhealthy diet to her doctor. A doctor prescribes a more expensive treatment than what might be necessary. A life insurance customer does not disclose his enjoyment of high-risk sports.

An obese person refuses to admit that he has a weight problem.

Which two countries produce nearly half of the world's greenhouse gases? China and India China and the United States India and the United States Russia and United States

China and the United States

When an activity has a private marginal benefit of D1, a private marginal cost of S1, and a positive externality, which curve best represents the social marginal benefit? D0 D2 S0 S2

D2

Which is TRUE regarding the Coase theorem? It doesn't matter which party to the transaction is assigned the property rights. The theorem works better when transaction costs are substantial. Neither party to the transaction can be assigned property rights. Bargaining will never lead to an efficient allocation of resources.

It doesn't matter which party to the transaction is assigned the property rights.

Which statement describes a public good? It is nonrival in consumption and nonexcludable. It is rival in consumption and excludable. It is nonrival in consumption and excludable. It is rival in consumption and nonexcludable.

It is nonrival in consumption and nonexcludable.

Which global climate change accord was created in 2016 to reduce carbon emissions worldwide and subsequently signed by nearly every country in the world? Maastricht Treaty Bretton Woods Agreement Kyoto Protocol Paris Agreement

Paris Agreement

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is TRUE? Flu shots create an external cost. If flu shots were not free, the number of people getting them would be larger than what is socially optimal. The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking. The externality is created by producers for producers.

The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking.

When people place a high value on ensuring a cleaner environment for future generations, which statement is TRUE? The future is discounted at a relatively low rate. The present value of future environmental benefits is lower. The present value of future environmental benefits would equal the discount rate. Environmental damage suffered in the future would be of less concern today.

The future is discounted at a relatively low rate.

Why isn't "zero emissions" generally a socially efficient level of pollution? Only command and control policies could achieve this outcome. No one in society actually desires this level of emissions. The marginal damage from emissions would greatly exceed the marginal abatement cost. The marginal abatement cost would greatly exceed the marginal damage from emissions.

The marginal abatement cost would greatly exceed the marginal damage from emissions.

Some of the mangos from your neighbor's mango tree drop into your yard. You don't like mangos, and the fallen mangos make it harder to mow your lawn. Your neighbor values the tree at $300, and your cost of dealing with it is $500. If your neighbor has the legal right to keep the tree, what would be an efficient outcome according to the Coase theorem? You call city officials to have the tree cut down. You pay your neighbor $400 to cut the tree down. Your neighbor pays you $400 to not have the tree cut down.Y our neighbor pays you $200 to not have the tree cut down.

You pay your neighbor $400 to cut the tree down.

Which of these is nonexcludable but rival? a pure public good a pure private good a public good with exclusion a common property resource

a common property resource

Which of these is the BEST example of a common property resource? a bicycle rental program a public recreational park the Singapore Flyer Ferris wheel Universal Studios theme park

a public recreational park

Which of these is NOT a consequence of climate change? diminishing Arctic sea ice and coral reefs melting ice sheets leading to rising sea levels a significant reduction in precipitation and coastal flooding extensive biodiversity loss

a significant reduction in precipitation and coastal flooding

The marginal social cost curve lies _____ the marginal private cost curve when negative externalities exist; the marginal social benefit curve lies _____ the marginal private benefit curve when positive externalities exist. above; below above; below above; above below; below

above; above

All of these are reasons companies spend money on corporate sustainability programs despite the potential of reducing profits EXCEPT improving the corporate image. responding to the demands of consumers. achieving political gains in order to eliminate future environmental regulations. adapting to newer technologies to improve long term efficiency.

achieving political gains in order to eliminate future environmental regulations.

All of these are consequences of global warming EXCEPT loss of coastlines. reduction in the natural habitats of species. an increase in the natural carbon absorption system. rising numbers of droughts and heat waves.

an increase in the natural carbon absorption system.

The largest percentage of greenhouse gases come from carbon dioxide from fossil fuel and industrial processes. methane gases from livestock production. nitrous oxide produced on farms from the use of synthetic fertilizers. fluorinated gases from the use of refrigerators, air conditioners, and aerosol cans.

carbon dioxide from fossil fuel and industrial processes.

The largest form of greenhouse gases caused by human activity is carbon dioxide from the use of fossil fuel. carbon dioxide from deforestation. methane gases from livestock farming. nitrous oxides from synthetic fertilizer usage.

carbon dioxide from the use of fossil fuel.

Which of these is NOT a market-based policy to reduce pollution? carbon taxes carbon restrictions carbon tradable permits carbon credits

carbon restrictions

If the amount of emissions being produced is E1, what would be the area representing the deadweight loss to society? 0eCe eESE0 eba beEsE1

eba

Which of these is a pure public good? environmental protection a public park I-95 flu shots

environmental protection

Paying $5 on Amazon to stream a movie is an example of a service that is _____ in consumption. excludable and rival excludable and nonrival nonexcludable and rival nonexcludable and nonrival

excludable and nonrival

The provision of public goods is generally made by _____ because of the problem of _____. private markets; free riders private markets; misallocation of resources governments; free riders governments; overfunding of projects

governments; free riders

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then production of the good is greater than the socially efficient amount. less than the socially efficient amount. efficient as long as marginal private costs equal marginal social benefit. efficient as long as marginal private costs exceed marginal social benefit.

greater than the socially efficient amount.

Which of these activities is the LEAST likely to generate an externality? smoking outside of the entrance of a mall hiking the Appalachian Trail over the summer obtaining vaccinations for one's child before starting school picking up litter around the neighborhood

hiking the Appalachian Trail over the summer

The market demand for private goods is found by summing individual demands _____, and the total demand for public goods is found by summing individual demands _____. horizontally; horizontally vertically; vertically horizontally; vertically vertically; horizontally

horizontally; vertically

If a government creates a market of tradable permits for greenhouse gases, the price of these permits would _____ if environmentalists buy up permits to reduce the total amount of greenhouse gases. decreas enot change ncrease become worthless

increase

Combating global climate change is described as a public good because it is subjected to the free rider problem. it is relatively easy to encourage countries to pay their share of pollution abatement costs. tradable emissions permits are sold worldwide. large developed countries create most of the world's greenhouse gases.

it is subjected to the free rider problem.

Global warming is described as a _____ negative externality with a _____ time horizon. large; short large; long small; short small; long

large; long

The free rider problem typically results in a production of output that is equal to the social optimal quantity. greater than the social optimal quantity. less than the social optimal quantity. undetermined without further information.

less than the social optimal quantity.

If an unregulated industry generates pollution, the market price is _____ than the socially optimal price, and the market quantity is _____ than the socially optimal quantity. greater; less less; less greater; greater less; greater

less; greater

A subscription to Hulu is considered a public good with exclusion because it is rival and excludable. nonrival and nonexcludable. rival and nonexcludable. nonrival and excludable.

nonrival and excludable.

Which of these actions is MOST likely to internalize a positive externality? adding new restrictions on when one can water the lawn reducing the amount of college scholarships available to lower income students reducing the fees companies must pay for carbon emissions providing an in-store discount card after getting a flu shot

providing an in-store discount card after getting a flu shot

Which of these is NOT a major cause of greenhouse gas emissions? deforestation burning fossil fuels livestock production soybean farming

soybean farming

What type of government policy is generally used when a positive externality is present? taxes restrictions on consumption restrictions on production subsidies

subsidies

Which of these policies would NOT require the government to know the approximate cost of pollution abatement to implement effectively? user charges emissions taxes tradable permits federal subsidies

tradable permits

If the marginal damage curve is above the marginal abatement cost curve at the current quantity of emissions, the socially optimal amount of emissions will always be zero. will be less than the current amount. is currently achieved. will be greater than the current amount.

will be less than the current amount.