60) If the local airport decides to pay monetary compensation to the people on whom the
airport’s operation has imposed costs, it should compensate the people who
A) currently live nearby.
B) currently live nearby and are also tenants.
C) currently live nearby and also own the residences in which they live.
D) owned nearby residences when the airport was built.
E) owned nearby residences when the airport was built and who have not been able to sell their
residences since the construction of the airport.
61) The Audubon Society currently allows three oil companies to extract natural gas on its
Rainey Wildlife Sanctuary because
A) natural gas is more valuable than wildlife conservation.
B) oil interests actually own the Audubon Society.
C) the government required the leasing of natural gas rights under its power of eminent domain.
D) the sanctuary must, by law, be used to promote the public interest.
E) the sanctuary is the private property of the Audubon Society.
62) An ordinance making it illegal for people to park commercial vehicles on the street overnight
in residential areas
A) protects property rights.
B) takes away property rights.
C) protects some property rights and takes away others.
D) has nothing to do with property rights.
E) reduces negative externalities for residents of affected areas.
63) Is there any difference between fining people who put contaminants into the atmosphere and
charging fees for putting contaminants into the air?
A) Not if the fee and the fine are the same per quantity of contaminant.
B) Not if the fee per quantity of contaminant is the same as the fine multiplied by the probability
of “getting caught.”
C) Only in the language or rhetoric, but not in the incentives the laws create.
D) Yes, because a fee constitutes social authorization while a fine expresses social disapproval.
64) The “bubble concept,” which is sometimes used by EPA in its pollution control programs, is
designed to
A) capture pollutants and dispose of them safely.
B) confine pollution within a narrow area.
C) make the people who pollute the most the ones financially responsible for pollution control.
D) reduce the cost of achieving pollution-reduction targets.
E) restore control over the environment to state and local governments.
65) Negative externalities might be reduced by letting people “work it out themselves,” which
might also be described as ________.
A) substantiation.
B) negotiation
C) remuneration
D) adjudication
E) appropriate taxation
66) Negative externalities might be reduced through a process of deciding or discovering who
has which rights, which might also be described as ________.
A) adjudication
B) remuneration
C) legislation
D) substantiation
E) identification
67) Negative externalities might be reduced by creating new rights, which we would describe as
________.
A) adjudication
B) remuneration
C) legislation
D) substantiation
E) reparation
68) Fill in the blanks: ________ attempts to reduce negative externalities by ________.
A) Legislation; appropriate taxation
B) Legislation; letting people work out the problem themselves
C) Adjudication; creating new rights
D) Adjudication; discovering who has which rights
69) Fill in the blanks: ________ attempts to reduce negative externalities by ________.
A) Negotiation; discovering who has which rights
B) Negotiation; creating new rights
C) Legislation; creating new rights
D) Legislation; discovering who has which rights
70) Fill in the blanks: ________ attempts to reduce negative externalities by ________.
A) Adjudication; letting people work out the problem themselves
B) Adjudication; discovering who has which rights
C) Negotiation; creating new rights
D) Negotiation; appropriate taxation
71) Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units, and
Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1 per unit, B’s
cost is $2 per unit, and C’s cost is $3 per unit. If the EPA prohibits any factory from emitting
more than 15,000 units of yuck per month, what would be the total cleanup cost?
A) $15,000
B) $40,000
C) $45,000
D) $90,000
E) $120,000
72) Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units, and
Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1 per unit, B’s
cost is $2 per unit, and C’s cost is $3 per unit. If the EPA orders each factory to reduce its
emissions by half, what would be the total cleanup cost?
A) $45,000
B) $67,500
C) $105,000
D) $122,500
E) $127,000
73) Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units, and
Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1 per unit, B’s
cost is $2 per unit, and C’s cost is $3 per unit. If the EPA orders each factory to reduce emissions
by 15,000 units, what would be the total cleanup cost?
A) $75,000
B) $90,000
C) $105,000
D) $127,000
74) Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units, and
Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1 per unit, B’s
cost is $2 per unit, and C’s cost is $3 per unit. If the EPA wishes to reduce total emissions down
to 45,000 units per month, which of the following is the lowest-cost method?
A) Leave Factory C alone, and force both A and B to each reduce their emissions to zero units
per month.
B) Leave Factory A and B alone, and force C to reduce emissions to zero units per month.
C) Leave Factory A alone, and force both B and C to each reduce their emissions to 15,000 units
per month.
D) All of the above would be accomplished at the same cost.
75) Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units, and
Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1 per unit, B’s
cost is $2 per unit, and C’s cost is $3 per unit. If the EPA required each factory to pay a $2.01 tax
for each unit of yuck it emits monthly, what would be the new level of total monthly emissions,
and what would be the total cost of cleanup?
A) 45,000 units; $75,000
B) 45,000 units; $90,000
C) 45,000 units; $105,000
D) 45,000 units; $120,000
76) Taxes on emissions have come to be called
A) the “command and control” approach.
B) “licenses to pollute.”
C) spillover costs.
D) the fallacy of false alternatives.
77) In the economic way of thinking, a tax on pollutants
A) unfairly places the burden of pollution reduction on the poor.
B) is inefficient because it won’t reduce pollution to zero.
C) tries to alter relative money costs to reflect new decisions about who has which rights.
D) cannot be labeled unfair as long as the tax revenues are used to fund public works projects.
78) Who among the following is exercising their right to pollute?
A) The group of campers burning a fire in a designated fire pit at a state forest campsite
B) The Sunday morning churchgoer whose auto emits carcinogens from its exhaust pipe
C) The publicly-owned and federally-regulated coal-fired electric utility
D) All of the above.
E) None of the above.
79) If Barbecue Bob has a right to own and use his backyard barbecue, then Barbecue Bob also
enjoys
A) a right to pollute.
B) a right to steal.
C) a right to free charcoal.
D) a right to clean air.
80) A fully licensed driver, Clarity Dence just drove her car to an “Earth Day” rally. By doing so,
she exercises
A) her right to drive beyond the speed limit.
B) her right to threaten and steal.
C) her right to pollute.
D) her right to park wherever she sees fit.
E) none of the above.
81) Who among the following exercises a right to pollute?
A) A cigarette smoker
B) An automobile driver
C) An owner of a coal-fired electrical utility
D) A user of household sprays
E) All of the above.
82) According to your textbook authors, pollution is
A) an imaginary problem invented by fanatical environmentalists.
B) a major social and political concern because people disagree about rights.
C) a less important problem than inefficiency.
D) always increasing and never capable of being reduced.
83) According to your textbook, pollution is a major social and political concern because
A) it is inefficient.
B) it is always immoral.
C) people disagree about rights, which are extremely difficult to resolve.
D) the environment is on the verge of ecological catastrophe.
84) According to the textbook authors, pollution is a growing “social” problem because
A) only society, rather than individuals, pollutes.
B) pollution is inefficient.
C) pollution is economically efficient.
D) more people are beginning to question the moral and legal rights of polluters.
85) In the economic way of thinking, the demand for clean air is
A) nonexistent.
B) independent of price or cost.
C) completely inelastic.
D) all of the above.
E) none of the above.
86) Pick the scarce good below with the completely inelastic demand curve.
A) Clean air
B) Clean water
C) Tropical rain forests
D) Well-maintained national-forest fisheries
E) Trick question: none of the above goods have a completely inelastic demand curve.
87) The law of demand applies to
A) clean streets.
B) clean air.
C) clean water.
D) the maintenance endangered species.
E) all of the above.
88) The economic way of thinking claims there are substitutes for
A) any good.
B) most goods except non-renewable resources.
C) most goods except clean air and clean water.
D) most goods except wetlands and tropical rain forests.
89) In the economic way of thinking, a wetland is a scarce good. Thus,
A) there is a substitute for a wetland.
B) there is no substitute for a wetland.
C) wetlands should be preserved at any cost.
D) wetlands can be preserved at no cost.
E) economists don’t like wetlands.
90) In the economic way of thinking, a tropical rainforest is a scarce good. Thus,
A) there is no substitute for a tropical rain forest.
B) there is a substitute for a tropical rain forest.
C) tropical rains forests should be preserved at any cost.
D) tropical rain forests can be preserved at no cost.
E) economists don’t like tropical rainforests.
91) In the economic way of thinking, bald eagles are a scarce good. Thus,
A) the bald eagle population can be maintained at no cost.
B) the bald eagle population should be maintained at any cost.
C) there are substitutes for bald eagles.
D) there are no substitutes for bald eagles.
E) economists don’t like bald eagles.
92) Suppose an economist claims there are substitutes for wetlands. The person is saying
A) wetlands are of no value.
B) wetlands are worth less than their substitutes.
C) there is a cost to maintaining a wetland.
D) there is a cost to maintaining a wetland, and it is necessarily too high.
E) economists don’t like wetlands.
93) If an economist claims there are substitutes for clean air, he is really saying
A) clean air is free air.
B) there are costs to cleaning the air.
C) nobody is truly harmed by unclean, polluted air.
D) dirty air is better than clean air.
E) economists don’t care for clean air.
94) If an economist claims there are substitutes for fossil fuels, she is really saying
A) fossil fuels don’t have to be economized.
B) fossil fuels aren’t scarce goods.
C) fossil fuels aren’t important.
D) fossil fuels are used, and maintained, only at a cost.
E) economists don’t care for fossil fuels.
95) The text uses traffic congestion as an example of
A) a surplus of automobiles.
B) a negative externality.
C) a good priced above equilibrium.
D) an engineering rather than an economic problem.
96) Traffic congestion is an example of a negative externality because
A) motorists take into account all benefits while driving.
B) motorists take into account all costs while driving.
C) a motorist’s cost of driving spills over and affects other motorists.
D) a motorist’s benefit from driving spills over and affects other motorists.
97) Fill in the blank: According to the authors of your text, traffic congestion can be reduced by
________ the spillover costs associated with driving.
A) modernizing
B) estimating
C) externalizing
D) internalizing
98) In the economic way of thinking, traffic congestion is a sign of
A) a surplus of people.
B) a surplus of automobiles.
C) a shortage of buses.
D) a negative externality.
99) The authors of your text suggest which policy as a way of reducing urban traffic congestion?
A) A federal standard raising the minimum age for a driver’s license to 21 years old
B) Requiring motorists to pay a toll or fee based on the costs their driving imposes on others
C) Increasing gasoline taxes
D) Requiring people to drive in car pools
100) Congestion pricing
A) is an estimation of the price of being off of work with the flu.
B) is an attempt to internalize the external costs of driving.
C) is the raising of taxes on gasoline to support the construction of mass urban transit systems.
D) works fine in theory but cannot work in the real world because the technology is lacking.
101) In chapter 1 your authors marveled at the way highway traffic is orderly and self-regulating.
In chapter 6, however, they discuss a growing problem on urban roadways—congestion. What’s
the cause of roadway congestion?
A) Typically, road use is a scarce good with a zero price tag.
B) Not enough drivers have studied economics.
C) More and more drivers think only of themselves.
D) Population growth
102) According to your textbook, the following is the prime cause of traffic congestion:
A) Population growth
B) The American automobile industry
C) Most roadway space is not priced.
D) A lack of commitment to public transportation expansion
103) Traffic congestion is an example of
A) a shortage of roadway space.
B) a surplus of automobiles.
C) a surplus of drivers.
D) a surplus of people.
104) According to the text, “congestion” is another word for
A) confusion.
B) cost.
C) inconsiderate behavior.
D) shortage.
105) The schedule of tolls capable of maximizing the net revenue of a bridge owner
A) has no relationship to the cost of constructing the bridge.
B) is the highest anyone will pay rather than forgo the opportunity to cross the bridge.
C) varies proportionately to the cost of constructing the bridge.
D) will be higher than the corresponding tolls for a tunnel, because tunnel construction costs
must be sunk rather than elevated.
106) Drivers are charged a price to use a tollway. But even tollways, such as the Tri-State
Tollway near Chicago, become heavily congested during the morning and evening rush hours.
Thus,
A) the rush hour represents a surplus of cars.
B) your textbook author is wrong in claiming congestion is caused by zero prices.
C) higher tolls are required during rush hours to reduce congestion.
D) growing population is indeed the problem.
107) We can experience a shortage of any good or service if
A) the price of using it is too high.
B) the price of using it is too low.
C) people demand more than they need.
D) if people need more than they demand.
108) Generally speaking, resources are used more wastefully and carelessly when
A) users obtain the resources through the market process.
B) users do not have to pay the opportunity cost for using resources.
C) users use resources to only advance the projects they are interested in.
D) users privately own resources.
109) According to the 1974 Constitution of the former Yugoslavia, nobody in Yugoslavia owns
resources. Being a socialist country, the constitution claimed resources were owned by “society”
as a whole. If the constitution were fully enforced, resources would tend to be
A) used for the common good.
B) used without greed and materialistic interests.
C) free from the constraints of scarcity.
D) underpriced.
110) According to the 1974 Constitution of the former Yugoslavia, nobody in Yugoslavia owns
resources. Being a socialist country, the constitution claimed resources were owned by “society”
as a whole. According to the economic way of thinking,
A) their economic problem would be solved.
B) resources would finally be used efficiently, because the profit motive would be destroyed.
C) people would use Yugoslavia’s resources wastefully because they themselves wouldn’t have
to pay the opportunity cost.
D) the central planners would know how to calculate the true values and costs of resource use.