Microeconomics Special Topic 12—Difficult Environmental Cases and the Role of
Government
MULTIPLE CHOICE
1. When it is difficult to assign and enforce property rights,
a.
markets result in outcomes that are often inefficient.
b.
courts can easily negotiate efficient outcomes.
c.
establishing better property rights is always the best way to deal with environmental
problems.
d.
government regulation can never improve on the outcomes generated by competitive
markets.
2. Economic thinking indicates that efficient adaptation strategies to reduce harms from future global
warming will
a.
focus on reducing overall carbon emissions.
b.
emphasize changes like those imposed on prosperous nations by the Kyoto Treaty.
c.
focus on reducing the effects of serious problems that we know to exist.
d.
ensure that every precaution will be taken to reduce any possible risks for the future.
3. The burning of fossil fuels may cause global warming. Considering both the science and the reactions
of crops, human health, and other factors across differing climates, economists generally agree that
a.
to protect the interests of future generations, the buildup of carbon dioxide must soon be
stopped.
b.
any climate change, if it actually occurs, will be extremely costly.
c.
there will be both costs and benefits if the climate warms.
d.
all people will be worse off if the climate warms.
4. When it comes to environmental policy,
a.
choices are influenced by the costs and benefits that decision makers expect.
b.
values are subjective, as in other areas of the economy.
c.
policy choices often have unintended secondary effects.
d.
all of the above are true.
5. Which of the following is, so far, the most utilized method to reduce emissions of industrial pollution
to politically chosen levels, while encouraging efficient choices by polluters?
a.
government pollution charges or taxes
b.
non-tradable emission standards that cap allowable pollution for each emitter
c.
cap and trade emission permits
d.
regulations that would effectively prohibit all emissions
6. It can be difficult to define and enforce property rights against damaging pollutants when
a.
many polluters are harming one person.
b.
many polluters harm the same large group of people with the same pollutant.
c.
the harms are difficult to quantify.
d.
All of the above are true.
7. Which of the following would illustrate an example that leads to high transaction costs when dealing
with pollution?
a.
air quality in New York City
b.
water pollution caused by a large number of firms at a location near the same river
c.
noise pollution from aircraft near a busy airport
d.
all of the above
8. Which of the following is an example of a deficiency caused by a regulatory approach to pollution?
a.
ignored information provided by market signals
b.
special interest influence on policies
c.
lack of accountability by regulators for costs of regulation
d.
all of the above
9. When is the definition and enforcement of property rights especially difficult?
a.
when many polluters harm a large group of people by emitting the same pollutant
b.
when a single polluter is harming a single person or entity
c.
when land is owned by a corporation
d.
when the benefits of prosecution are clear
10. Government regulation is
a.
subject to the same problems of lack of information and lack of incentives for economic
efficiency as centrally planned economies.
b.
the only reliable way to improve environmental quality.
c.
not subject to political concerns when it comes to environmental quality.
d.
the most economically efficient way to reduce greenhouse gases.
11. Which of the following is true?
a.
All types of environmental problems can be solved merely by the enforcement of
individual property rights.
b.
Environmental regulation cannot improve environmental quality.
c.
Income levels exert little impact on the demand for environmental quality.
d.
Markets often result in outcomes that are inefficient when it is difficult to assign and
enforce property rights.
12. The opportunity costs of policies to slow global warming under the Kyoto Protocol would include
a.
fuel-use reductions that would slow economic growth in most of the world.
b.
economizing on energy use in ways that would, on balance, increase economic growth.
c.
very few costs that would affect resource-conserving industrial nations such as the United
States.
d.
high costs in developing nations such as India but not in industrial nations.
13. Empirical evidence indicates that
a.
changes in the earth’s cloud cover will clearly enhance the warming effects of carbon
dioxide.
b.
the increase in carbon dioxide, over thousands of years, is clearly the cause of global
warming.
c.
if global warming continues for another century, as most models forecast, the sea levels
will clearly rise substantially, imposing costs much larger than the cost of preventing the
warming.
d.
the earth has warmed a little more than one degree Fahrenheit in the past century.
14. “The United States should not sign the Kyoto Protocol, an international treaty that requires industrial
nations to limit carbon dioxide emissions to 1990 levels.” An economist should be expected to
a.
disagree with this statement. The science on global warming is clearly known, and the
Kyoto Protocol is the best, lowest cost, method to minimize the effects of global warming.
b.
disagree with this statement. Even though much critical information is still missing, the
Kyoto Protocol will certainly reduce carbon emissions enough to greatly reduce
atmospheric warming.
c.
agree with this statement. The benefits of a warming climate will unquestionably be
greater than the costs.
d.
probably agree with this statement. The costs of the Kyoto Protocol are great, and the
expected impact from it on world temperatures over the next century is extremely small.
15. The current empirical evidence indicates that
a.
changes in the earth’s cloud cover will clearly enhance the warming effects of carbon
dioxide.
b.
the increase in carbon dioxide, over thousands of years, is definitely the cause of global
warming.
c.
if global warming continues as most models predict, then in the next 100 years the sea
levels clearly will rise by more than 10 feet.
d.
none of the above is true.
16. Besides the scientific uncertainties, which of the following has kept most economists from
recommending strong regulations to reduce emissions of carbon dioxide?
a.
consumer ignorance
b.
the Kyoto Protocol
c.
high costs and the potential for special-interest involvement in regulations
d.
The Clean Air Act of 1990
17. The opportunity cost of slowing global warming by reducing carbon dioxide emissions is
a.
extremely high because policies that would significantly reduce emissions will adversely
affect economic growth.
b.
insignificant compared to the probable impact of warming from those emissions.
c.
irrelevant because each aspect of the environment is important enough to justify full
protection from environmental change, at whatever cost is necessary.
d.
zero because fuel cost savings alone will offset all opportunity costs.
18. Higher levels of carbon dioxide may have led, over the past century, to approximately a
a.
1 degree (F) warming of the earth.
b.
10 degree (F) warming of the earth.
c.
1 degree (F) cooling of the earth.
d.
10 degree (F) cooling of the earth.
19. Most scientists agree that
a.
if global warming continues for another century, the sea levels will rise substantially,
imposing costs much larger than the cost of preventing the warming.
b.
the earth has warmed about one degree Fahrenheit in the past century.
c.
global warming will substantially reduce future rates of economic growth and lead to
sharp reductions in living standards.
d.
regulations like those outlined in the Kyoto Protocol will substantially reduce global
warming.
20. Regarding wealth and environmental quality,
a.
richer people are more willing to make sacrifices to gain greater environmental quality.
b.
poor nations are less resilient when faced with the threats caused by environmental
degradation.
c.
richer people are more able to make sacrifices to gain greater environmental quality.
d.
all of the above
21. The scientific evidence on the causes and consequences of global warming
a.
is clear and indisputable.
b.
has considerable uncertainty in its findings.
c.
indicates global warming should be stopped regardless of cost.
d.
is of no importance to economists.
22. An economist would argue that global warming is
a.
unquestionably a human-generated problem that should be stopped immediately at all
costs.
b.
simply fear mongering, for there is no scientific evidence that the average temperature on
earth is changing.
c.
likely to cause massive starvation as temperatures on earth rise, reducing agricultural
productivity.
d.
a serious issue that may best be addressed primarily by making changes as problems occur
in the future.
23. The Kyoto Protocol
a.
is an international treaty that requires industrial nations to limit carbon dioxide emissions
to 1990 levels.
b.
should be rejected because the benefits of a warming climate will unquestionably be
greater than the costs.
c.
would have no net effect on the global economy.
d.
was ratified by the Congress of the United States.
24. Which of the following will likely have the strongest demand for large expenditures on environmental
quality?
a.
wealthy countries
b.
poor countries
c.
countries with air pollution problems
d.
countries with water pollution problems
25. Environmental regulation by the government
a.
leads to ideal outcomes in most cases.
b.
is often based on goals for pollution levels that were determined by market signals.
c.
is most appropriate when the pollution of concern comes from many sources.
d.
is most likely to be economically efficient when the regulation provides substantial
benefits for special-interest groups.
26. Which of the following is true?
a.
All types of environmental problems can be solved simply by the enforcement of
individual property rights.
b.
Environmental regulation cannot improve environmental quality.
c.
Regulation nearly always leads to economically efficient outcomes.
d.
Government regulation is subject to the same problems caused by lack of information and
lack of incentives for economic efficiency that plagued centrally planned economies.
27. With regard to environmental programs and regulations, economic analysis indicates that
a.
environmental quality is something that people value and, therefore, are willing to pay for.
b.
people value many other things, but environmental values always come first.
c.
income levels exert little impact on the demand for environmental quality.
d.
the cost of an environmental policy matters little if the policy provides environmental
health benefits.
28. Which of the following is the most efficient method to reduce pollution emissions?
a.
government pollution charges or taxes
b.
non-tradable emission standards that cap allowable pollution
c.
common law enforcement of property rights, when those rights are well-defined and
transaction costs are low
d.
legislated regulations limiting the quantity of emissions allowed by each firm
29. What is the economically efficient level of emissions from a particular source?
a.
zero
b.
the quantity at which the marginal cost to achieve lower emissions equals the additional
value of reducing pollution
c.
the level determined by EPA (Environmental Protection Agency) scientists that will save
the most lives
d.
the level emitted when markets are allowed to function with no government regulation
30. Economic analysis implies that one of the most effective ways to deal with potential damages from
environmental pollution is to
a.
declare the relevant resources to be public goods, owned by the public.
b.
establish and enforce property rights for the resources that are being damaged, if possible.
c.
allow the government to take over and control all natural resources.
d.
enact legislation that makes all environmental pollution illegal.
31. Which of the following is the most efficient way to reduce pollution emissions?
a.
emission standards that cap allowable pollution
b.
government pollution charges or taxes
c.
legislated regulations limiting the quantity of emissions allowed by each firm
d.
enforcement of property rights, when those rights are well-defined and transaction costs
are low
32. Pollution charges will be efficient if
a.
the charge is just equal to the cost borne by others from the pollution.
b.
the charge is greater than the cost borne by others from the pollution.
c.
the charge is less than the cost borne by others from the pollution.
d.
none of the above.
33. Most of our environmental problems exist because of
a.
a lack of enforced and easily traded property rights.
b.
consumer ignorance.
c.
profit maximization on the part of business firms.
d.
the failure of political officials to regulate business activities.
34. Providing citizens with enforceable property rights to resources
a.
increases resource conservation and decreases wasteful resource use.
b.
promotes economic prosperity and thus increases demand for environmental quality.
c.
provides people with a strong incentive not to damage the privately owned resources of
others.
d.
does all of the above.
35. Pollution from a privately owned factory that seriously harms a privately owned forest will, if property
rights are strongly protected,
a.
not result in penalties to the polluter, who has a right to use his property as he wishes.
b.
make the polluter liable for any damages done to the forest.
c.
be ignored under the law, in favor of the polluting factory owner.
d.
never occur.
36. For a privately owned business in a competitive market setting,
a.
reducing resource use while producing the same output adds to profit and typically reduces
waste products and thus cuts pollution as well.
b.
when property rights are well-defined and strictly enforced, the firm will be able to pollute
air and water without having to bear the cost of the damages imposed on others.
c.
wasteful use of resources results in more pollution but greater profit.
d.
reducing pollution almost never pays.
37. “Since the wind and the flowing rivers can take away industrial waste without charge, polluting is a
profitable activity even when people are seriously harmed downwind or downstream, unless
environmental regulators stop it.” This statement is
a.
false if the property rights of downwind or downstream individuals are protected.
b.
true if the property rights of industrialists are enforced.
c.
never true.
d.
always true.
38. Overfishing in the ocean often
a.
is easily solved by shortening the fishing season.
b.
is not caused by better technologies, which today’s fishers would not use if they harmed
the resource.
c.
occurs only when regulators fail to regulate due to corruption.
d.
is caused by many boats racing to catch more fish in a very short season.
39. Individual transferable quotas (ITQs) have been shown to
a.
increase the value of fisheries but reduce the safety of fishers as the season is shortened.
b.
end overfishing by making the use of efficient technology illegal.
c.
increase the safety of fishing but not the value to consumers of the product.
d.
increase the value to consumers of the product and raise the price received by fishers.
40. The fish in the ocean are
a.
allocated efficiently because there are no limitations on entry into the ocean fisheries
business.
b.
scarce, but only because of the highly restrictive regulations imposed by various nations.
c.
a commonly owned, open access resource and therefore they are often over-exploited.
d.
privately owned and therefore they are allocated efficiently.
41. Which of the following is an effort to establish property rights and promote more efficient allocation
of ocean fisheries?
a.
Regulations limiting the length of the fishing season.
b.
Regulations reducing the size of fishing boats and other equipment used in the industry.
c.
Establishment of transferable individual fishing quotas.
d.
Complete open access of ocean fishing to anyone who would like to enter the business.
42. When the federal government owns land resources, such as parks, that are funded by tax dollars,
a.
park mangers receive full information about visitor desires simply by asking visitors.
b.
public park managers have the same incentives as private park managers, where visitors
pay at least the actual costs of use.
c.
park managers devote much time and effort to satisfying congressional desires instead of
visitor desires.
d.
park managers will be well-informed of visitor demands regardless of the funding
mechanism.
43. When a park is funded by visitors, but not by taxpayers in general,
a.
there will be too few parks because most people simply will not pay to use a park.
b.
visitors will be better served because poor service would lead to reductions in revenues.
c.
maintenance in the park will suffer because budgets will decline.
d.
we cannot predict what will happen because park funding by visitors has not been tried
before.
44. When the federal government owns parks that are funded by tax dollars,
a.
park managers receive full information about visitor desires and make decisions
accordingly.
b.
the same incentive structure exists for public park managers as private park managers.
c.
park managers devote much time and effort to satisfying political desires instead of visitor
desires.
d.
park managers will be less likely to mismanage the park.
45. When a park is funded by visitors but not by taxpayers in general,
a.
there will be too few parks because most people will not pay to use a park.
b.
visitors will be better served because poor service would lead to reductions in revenues.
c.
park budgets will decline.
d.
park quality will decline.
46. Which of the following would illustrate an example that leads to high transaction costs when dealing
with pollution?
a.
air quality in New York City
b.
water pollution caused by a large number of firms located near the same river
c.
noise pollution near a busy airport
d.
all of the above
47. Which of the following is an example of a deficiency caused by a regulatory approach to pollution?
a.
ignored information provided by market signals
b.
special interests
c.
lack of accountability
d.
all of the above
48. Higher levels of carbon dioxide may be leading to a
a.
1 degree (F) level of warming of the earth.
b.
10 degree (F) level of warming of the earth.
c.
1 degree (F) level of cooling of the earth.
d.
10 degree (F) level of cooling of the earth.
49. Empirical evidence indicates that
a.
changes in the earth’s cloud cover will clearly enhance the warming effects of carbon
dioxide.
b.
the increase in carbon dioxide, over thousands of years, is definitely the cause of global
warming.
c.
if global warming continues, the sea levels will definitely rise.
d.
none of the above are true.
50. Besides the scientific uncertainties, which of the following has kept most economists from
recommending strong regulations to reduce emissions of carbon dioxide?
a.
consumer ignorance
b.
the Kyoto Protocol
c.
the potential for special-interest involvement
d.
The Clean Air Act of 1990
51. (I) Richer people are more willing to make sacrifices to gain greater environmental quality.
(II) Poor countries are not as resilient when faced with the threats caused by environmental
degradation.
a.
Both I and II are true.
b.
I is true; II is false.
c.
I is false; II is true.
d.
Both I and II are false.
52. Pollution charges will be efficient if
a.
the charge is just equal to the cost borne by others from the pollution.
b.
the charge is greater than the cost borne by others from the pollution.
c.
the charge is less than the cost borne by others from the pollution.
d.
none of the above.
53. The tragedy of the commons refers to a situation in which a resource is overexploited because it is not
a.
a common resource.
b.
privately owned.
c.
a public good.
d.
scarce.
54. Which of the following is true?
a.
All types of environmental problems can be solved merely by the enforcement of
individual property rights.
b.
Environmental regulation cannot improve environmental quality.
c.
Income levels exert little impact on the demand for environmental quality.
d.
Markets often result in outcomes that are inefficient when it is difficult to assign and
enforce property rights.
55. When is the definition and enforcement of property rights especially difficult?
a.
When many polluters harm a large group of people with the same pollutant.
b.
When a single polluter is harming a single person or entity.
c.
When land is owned by a corporation.
d.
When the benefits of prosecution are clear.
56. The scientific evidence on the causes and consequences of global warming
a.
is clear and indisputable.
b.
is uncertain and variable.
c.
indicates global warming should be stopped regardless of cost.
d.
is of no importance to economists.
57. Which of the following is most likely to have the strongest demand for environmental quality?
a.
countries with water pollution problems
b.
poor countries
c.
countries with air pollution problems
d.
wealthy countries
58. Economic analysis indicates that environmental quality
a.
is something that people value, and therefore are willing to pay for.
b.
should always be regulated by the government.
c.
is something people should be forced to pay for no matter what their income levels.
d.
is not important to most people.
59. The Endangered Species Act
a.
weakened the property rights of landowners.
b.
encourages landowners to find new ways to provide habitat for listed species.
c.
provides compensation to landowners affected by the law.
d.
has not benefited any of the species protected under the act.
60. When the federal government owns parks that are funded by tax dollars
a.
park managers receive full information about visitor desires and make decisions
accordingly.
b.
the same incentive structure exists for public park managers as private park managers.
c.
park managers devote much time and effort to satisfying political desires instead of visitor
desires.
d.
park managers will be less likely to mismanage the park.
61. When a park is funded by visitors, but not by taxpayers in general,
a.
there will be too few parks, because most people will not pay to use a park.
b.
visitors will be better served, because poor service would lead to reductions in revenues.
c.
park budgets will decline.
d.
park quality will decline.
62. Which of the following is the most efficient way to reduce pollution emissions?
a.
Emission standards that cap allowable pollution.
b.
Government pollution charges or taxes.
c.
Legislated regulations limiting the quantity of emissions allowed by each firm.
d.
Enforcement of property rights, when those rights are well-defined and transaction costs
are low.
63. Government regulation is
a.
subject to the same problems of lack of information and lack of incentives for economic
efficiency as centrally planned economies.
b.
the only reliable way to improve environmental quality.
c.
not subject to political concerns when it comes to environmental quality.
d.
the most economically efficient way to reduce greenhouse gases.