1128 Miller Economics Today, 16th Edition
30) Which of the following is a true statement?
A) Externalities cannot be solved by market solutions and always require government action.
B) Externalities would never be a problem if people were willing to comply with government
regulations.
C) Voluntary agreements can solve externality situations by making the party incurring the
costs bear the costs of his or her actions.
D) Externalities can only be handled by government regulation and emission taxes cannot
work effectively.
31) Your neighbor in an apartment complex plays his music very loudly late at night, which makes
it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on
your sleep, to never play his music between midnight and 7 AM. By doing so,
A) you have failed to bring about an efficient solution since you should have complained to
the police.
B) you have indicated the cost of the externality. The externality is not internalized even if he
accepts your offer.
C) you have indicated the cost of the externality, which internalizes the externality.
D) you have indicated a willingness to make the external cost a social cost.
32) Which of the following is a true statement?
A) Any property right system will yield a situation in which all externalities are internalized.
B) Voluntary agreements can always yield a situation in which all externalities are
internalized.
C) Opportunity costs always exist with whoever has property rights.
D) Opportunity costs turn external costs into social costs.
33) Voluntary agreements may not be a feasible method to internalize an externality when
A) the dollar value of the externality is large.
B) the externality is negative rather than positive.
C) there are significant transaction costs.
D) there are high taxes on the firms that cause the externalities.
34) In which of the following externality situations would it be most likely that voluntary
agreements could be used to internalize an externality?
A) Littering on highways
B) Overharvesting of alligators in Louisiana
C) Poaching of elephants in Africa
D) Trees of one neighbor blocking a view of another
35) Which of the following is NOT a possible solution to the problem of pollution?
A) Converting a resource that is communally owned into a privately owned resource.
B) Imposing a tax on polluters that is related to the amount of pollution.
C) Regulating the amount of pollution that a firm can produce.
D) Subsidizing the costs of production of activities that generate pollution.
36) The best method to reduce pollution is
A) to never start polluting.
B) to establish private property rights.
C) dependent upon the characteristics of the resources and the transaction costs.
D) dependent upon the quality of government bureaucrats and the level of greed in the
society.
37) When there is a resource for which property rights are not well defined and there is a difference
between private costs and social costs, then all but which of the following is a way to close the
difference?
A) The free market system B) Taxation
C) Subsidization D) Regulation
38) Common property
A) is owned by everyone. B) is owned by no one.
C) Neither A nor B are correct. D) Both A and B are correct.
39) The exclusive rights of ownership of property are generally referred to as
A) level property rights. B) private property rights.
C) public property rights. D) common property rights.
40) A resource that is a common property is
A) oil on land owned by a drilling and refining company.
B) natural gas on land owned by an energy producer.
C) timber on land owned by a lumber company.
D) water in a publicly owned river.
41) Property that is owned by everyone and therefore by no one in particular is referred to as
A) common property. B) social property.
C) private property. D) commercial property.
42) Property owned by everyone (and thus no one in particular) is generally referred to as
A) social property. B) private property.
C) common property. D) natural property.
43) Which of the following is NOT an example of common property?
A) a trampoline B) air C) gravity D) sunshine
44) Which type of property would be the most likely to experience pollution?
A) common property B) private property
C) property held in partnership D) corporate property
45) For voluntary action to correct an externality,
A) transaction costs have to be high.
B) transaction costs have to be low.
C) transaction costs have to be split evenly between all of the parties involved.
D) transaction costs are irrelevant.
46) All of the costs associated with making and enforcing contracts are referred to as
A) alternative costs. B) opportunity costs.
C) marginal costs. D) transactions costs.
47) In a situation in which property rights are not well defined and social costs exceed private
costs, government can use all of the following to induce producers to bring private costs into
alignment with social costs EXCEPT
A) taxing production. B) coercive limits on production.
C) subsidization of production. D) regulation of production.
48) Suppose a large tree on Adam s property blocks Eve s view of the ocean. Adam accepts Eve s
offer of $15,000 to cut down the tree. This is an example of
A) internalizing externalities via voluntary agreements.
B) a result of logrolling.
C) a consequence of a positive externality.
D) a consequence of private costs exceeding social costs.
49) The costs associated with the negotiation and enforcement of an agreement are
A) property costs. B) resource factor costs.
C) transaction costs. D) attorney fees.
50) When property rights are clearly defined, there is generally a
A) law that must be passed to ensure fairness.
B) regulatory agency that handles externalities.
C) common property problem.
D) voluntary agreement that can be reached.
51) In order for a voluntary agreement to be reached in general, transaction costs should be
A) infinite.
B) high relative to expected marginal benefits of the agreement.
C) low relative to expected marginal benefits of the agreement.
D) determined by the Environmental Protection Agency.
52) What is common property? What does common property have to do with externalities?
53) Why are externalities associated with common property rather than private property?
54) Explain why the buffalo almost became extinct while cattle did not, even though both provide
similar goods for people.
31.5 Reducing Humanity s Carbon Footprint: Restraining Pollution Causing
Activities
1) The Framework Convention on Climate Change took place in
A) the 1973 1979 Tokyo Round B) the 1987 1993 Uruguay Round
C) the 1997 Kyoto Protocol D) the 2001 Doha Round
2) In the Kyoto Protocol, participating nations agreed to
A) trade carbon dioxide permits.
B) eliminate all emissions of greenhouse gases by 2020.
C) reduce their overall emissions of greenhouse gases between 1997 and 2020 to as much as
20 percent below 1990 levels.
D)
b
uy greenhouse gas emission permits from developing nations.
3) In 2005, the European Union began a program to
A) reduce greenhouse gas emissions by 10 percent within 5 years.
B) eliminate greenhouse gas emissions by 50 percent within 15 years.
C) subsidize firms that pollute more than a given limit.
D) allow the trading of carbon dioxide permits among firms.
4) In a market for emission permits, firms that emit over their allowed limits
A) are forced to shut down.
B) are taxed by the government for the amount of emissions.
C) receive a subsidy for the amount of emissions.
D) pay a price of these emissions.
5) In a market for emission permits, firms that emit over their allowed limits
A) are forced to shut down.
B) are taxed by the government for the amount of emissions.
C) will sell their excess allowances through a trading system.
D) must buy more allowances through a trading system.
6) In a market for emission permits, firms that emit below their allowed limits
A) will buy even more allowances through a trading system.
B) are taxed by the government for the amount of emissions.
C) receive a subsidy for the amount of emissions.
D) will sell their excess allowances through a trading system.
7) In theory, the Emissions Trading Scheme would
A) cause firms to generate more pollution than their allowed limits.
B) cause firms to generate less pollution than their allowed limits.
C) raise the production costs of all firms.
D) lower the production costs of all firms.
8) Under the Emissions Trading Scheme, what would happen if governments reduce firms
pollution caps?
A) The market clearing price of pollution permits will increase.
B) The market cleaning price of pollution permits will decrease.
C) The marketing cleaning price of pollution permits will not change.
D) The marketing clearing price of pollution permits will cease to exist.
9) The 1997 Kyoto Protocol was signed by
A) only the United States and the European Union.
B) only nations in Asia.
C) more than three dozen nations.
D) all nations in the world.
10) The Kyoto Protocol was signed by participating nations in
A) 1872. B) 1972. C) 1997. D) 2007.
11) Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases
emission
A) to as much as 20 percent below the levels of the 1990s through 2020.
B) to as much as 10 percent below the levels of the 1990s through 2010.
C) to as much as 100 percent below the levels of the 1990s through 2007.
D) to as much as 50 percent below the levels of the 1990s through 2100.
12) The Emission Trading Scheme of the European Union
A) created a market for pollutants.
B) sets a cap on the amount of pollutants in each country.
C) allowed firms to benefit from emitting pollutants.
D) sets the amount of per unit tax on each pollutant.
13) Which of the following best describes the impact of the Emissions Trading Scheme in the
European Union between 2005 and the late 2000s?
A) Overall greenhouse gas emissions increased.
B) Overall greenhouse gas emissions decreased.
C) Overall greenhouse gas emissions were totally eliminated.
D) Overall greenhouse gas emissions were constant.
14) Which of the following was signed in the Kyoto Protocol?
A) The Framework Convention on Climate Change
B) The Zero Greenhouse Gas Agreement
C) The Treaty on Global Warming
D) The Emission Trading Scheme
15) Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases
emission through 2020 to
A) as much as 20 percent below the levels in the 1990s.
B) as much as 5 percent below the levels in the 1990s.
C) as much as 50 percent below the levels in the 1990s.
D) as much as 50 percent below the levels in the 1960s.
16) The EU Emission Trading Scheme created a market for
A) permits to emit greenhouse gases.
B) cigarettes.
C) marijuana.
D) devices that lower the global temperature.
17) Which of the following is TRUE of the European Union s Emissions Trading Scheme?
A) Firms are taxed based on the their pollution levels.
B) Firms are forced to shut down when they exceed their pollution limits.
C) Governments subsidize firms to develop devices to reduce pollution.
D) Firms can trade pollution permits to meet their pollution limits.
18) By 2006, the market price of European Union emissions allowances dropped because
A) governments set their overall emission caps too high.
B) firms had drastically reduced their emissions.
C) firms underreport their emission amounts.
D) the market did not clear.
19) If pollution is bad, why do we still use pollution causing resources such as coal and oil to
generate electricity?
A) Governments lack the political will to enforce the use of pollution free resources.
B) The cost of using pollution free resources to generate power in many circumstances is
much higher than generating that same power through conventional pollution causing
means.
C) Pollution is only a private cost.
D) The transaction costs of pollution is too low.
20) Explain how a market for pollutant emission allowances can induce firms to reduce the amount
of emissions.
21) Creating a free market for carbon dioxide emission permits would only encourage firms to
pollute more. Do you agree or disagree? Why?
22) Creating a free market for carbon dioxide emission permits would only encourage firms to
pollute more. Do you agree or disagree? Why?
31.6 Wild Species, Common Property, and Trade Offs
1) Many ecologists argue that several species of whales are close to extinction. If this is true, the
reason is
A) inadequate enforcement of international laws.
B) whales are a type of common property.
C) the marginal benefit of hunting and killing a whale is greater than zero.
D) whale killing technology is too productive.
2) All of following are commonly considered to be common property EXCEPT
A) spotted owls in the wild. B) fish in an ocean.
C) chickens raised in a farm. D) wild salmon in a river.
3) Which of the following is most likely to be common property?
A) a cat in a house B) farm raised catfish in Alabama
C) tuna in the Pacific Ocean D) cattle in a Texas ranch
4) Which of the following are most likely to become an endangered species?
A) animals in the wild
B) domesticated animals
C) animals that people like to keep at home as pets
D) animals that people have property rights to own
5) Endangered species are likely to be
A) private property. B) common property.
C)
b
oth private and common property. D) neither private nor common property.
6) Protecting endangered species are likely to be
A) a private cost. B) a public cost.
C)
b
oth private and public costs. D) neither a private nor public cost.
7) Which of the following is TRUE about species in the world?
A) Most extinct species became extinct within the past 30 years.
B) The majority of extinct species became extinct before humans appeared.
C) Extinct species became extinct only after human appeared.
D) No species has ever become extinct.
8) The trade off of saving the spotted owls in the Pacific Northwest was
A) the loss of salmon in the region.
B) the increase in the number of marbled murrelets.
C) the loss of logging activities by lumber companies.
D) none.
9) Which of the following is most likely to be private property?
A)
b
ees B) house flies
C) farm raised chickens D) winds
10) Wild animals are likely to be
A) private property. B) endangered species.
C) domesticated by humans. D) all of the above.
11) The Endangered Species Act is an attempt to
A) protect endangered species against greedy loggers, farmers, and business people.
B) protect endangered species from the overzealousness of many environmentalists.
C) protect species endangered because there are no private property rights on them.
D) prevent some people from earning a good living.
12) For endangered species, the federal government
A) can only protect the animal on federal property because of common property issues.
B) has the right to regulate activities on private land to save the species from extinction.
C) turns over the protection of an endangered species to the state authorities where the
species lives.
D) will capture a pair of animals so that the species does not become extinct.
13) Saving endangered species
A)
b
enefits all people in society without any trade off.
B) must involve the loss of another species.
C) may involve a trade off in terms of the loss of other economic activities.
D) requires the government to list those species as common property.
14) The problem associated with endangered populations of migratory birds is the
A) common property problem. B) free rider problem.
C) deadweight loss problem. D) inefficient production problem.
15) The problem of overfishing in waters that are commonly owned can be solved by
A) the use of the Coase Theorem.
B) establishing property rights for fishing in the waters.
C) subsidizing fishing.
D) allowing the market to ration fish.
16) The problem of overfishing in waters that are commonly owned can be solved when the
government determines the total amount of fish can be removed from a given area during each
fishing season. Then the fishermen
A) will not be able to fish.
B) can trade their rights (shares) to fish or not.
C) will externalize their private costs to the government.
D) will lower their private costs to fish.
17) The Endangered Species Act has
A) caused a loss of economic activities on some private land.
B) saved all endangered species without affecting anyone.
C) further reduced the number of endangered species.
D) had no impact on either the number of endangered species or other economic activities.
18) Approximately what percentage of the world s extinct species became extinct before humans
appeared on earth?
A) 1 percent B) 10 percent
C) 20 percent D) more than 99 percent
19) Today, the earth has ________ of all of the species that have ever lived.
A) less than 1 percent B) about 50 percent
C) about 99 percent D) 100 percent
20) The number of species on earth is decreasing drastically and economic development is the
main factor for the problem. Do you agree or disagree? Why?
21) Why are most endangered species belong to common property?