ECON 1010 Lecture Notes - Lecture 59: Environment And Climate Change Canada, Demand Curve, Opportunity Cost
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Question 1:
The annual income that can be consumed without diminishing the total capital assets of a nation is
purchasing power parity income. |
sustainable national income. |
environmental capital stock. |
per capita income. |
Question 2:
Maintaining the rainforest is very important because
of its absorptive capacity for CO2 emissions. |
of maintaining agricultural production of countries dependent on the rainforest such as Brazil. |
ensuring a successful land reform policy. |
encouraging rainforest settlement of the poor |
Question 3:
Which of the following leads to an underallocation of resources to a specific economic activity?
External benefits |
Marginal costs |
External costs |
Marginal benefits |
Question 4:
The free-rider problem plagues public goods because
once public goods are produced it is not possible to exclude anyone from consuming these goods. |
the public doesn't care about public goods. |
public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society. |
policymakers ignore opportunity costs in making decisions |
Question 5:
Which of the following methods could be used to correct for external costs?
Require firms in the industry to install pollution control devices. |
Impose a tax or an effluent fee on the offenders. |
Have the offender clean up the pollution it caused. |
All of the above would be appropriate. |
Question 6:
To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if
the economic damages are zero. |
the administrative costs are high. |
the cost of ascertaining the actual economic costs are relatively small. |
the economic damages associated with the pollution are different across different locations. |
Question 7:
In order to internalize the externality due to pollution, the government should impose a tax based on
the size of the firm causing the pollution. |
the physical amount of pollution. |
the value of the pollution-causing business activity. |
the economic damage associated with the pollution. |
Question 8:
In a market for emission permits, firms that emit over their allowed limits
pay a price of these emissions. |
are forced to shut down. |
are taxed by the government for the amount of emissions. |
receive a subsidy for the amount of emissions. |
Question 9:
The 1997 Kyoto Protocol was signed by
more than three dozen nations. |
all nations in the world. |
only the United States and the European Union. |
only nations in Asia. |
Question 10:
The problem of overfishing in waters that are commonly owned can be solved by
subsidizing fishing. |
establishing property rights for fishing in the waters. |
the use of the Coase Theorem. |
allowing the market to ration fish. |
Question 1
An externality
Ā | Ā |
enhances market efficiency. |
Ā | Ā |
is a private cost or benefit that results from the production or consumption of a good or service that is external to a market. |
Ā | Ā |
is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service. |
Ā | Ā |
refers to production or consumption that occurs outdoors. |
5 points
Question 2
Externalities can be produced by:
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the high price of goods and services |
Ā | Ā |
individuals; firms |
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market prices; market incomes |
Ā | Ā |
oceans; streams |
5 points
Question 3
When an external cost exists that is NOT taken into account in the production of a product,
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the level of output is too high, and the supply curve should shift to the left to account for the externality. |
Ā | Ā |
the price of the product is too high, and production should be expanded to lower the price. |
Ā | Ā |
the level of output is optimal, and there should be no change in the supply curve. |
Ā | Ā |
the level of output is too low, and the supply curve should shift to the right to account for the externality. |
5 points
Question 4
Which of the following is correct?
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MSC = MPC - MD |
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MPC = MSC + MD |
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MSC = MPC + MD |
Ā | Ā |
MD = MSC + MPC |
5 points
Question 5
If external costs (costs of cleaning up) are included and added to a firm's private costs, then
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the demand curve will shift to the left. |
Ā | Ā |
the supply curve will shift to the right. |
Ā | Ā |
the demand curve will shift to the right |
Ā | Ā |
the supply curve will shift to the left. |
5 points
Question 6
The Coase Theorem states that
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government intervention is always needed if externalities are present. |
Ā | Ā |
assigning property rights is the only thing the government should do in a market economy. |
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if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities. |
Ā | Ā |
a free-market equilibrium is the best solution to address externalities. |
5 points
Question 7
Buffalo in the United States almost became extinct while cattle, an animal that provides similar products, never have been close to extinction. The difference is due to
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the use of private property rights on cattle and common property rights on buffalo. |
Ā | Ā |
the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of buffalo. |
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cattle existing in Europe also while buffalo were specific to North America. |
Ā | Ā |
the greater marginal value of a buffalo relative to a steer, leading to the overharvesting of buffalo. |
5 points
Question 8
In theory, the Emissions Fee would
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cause firms to generate less pollution than their allowed limits. |
Ā | Ā |
raise the production costs of all firms. |
Ā | Ā |
cause firms to generate more pollution than their allowed limits. |
Ā | Ā |
lower the production costs of all firms. |
5 points
Question 9
A cap-and-trade policy
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has a set number of permits. |
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allows polluters to trade permits. |
Ā | Ā |
caps the total level of pollution allowed. |
Ā | Ā |
all of the above. |
Question 10
A Pigouvian tax corrects for
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market congestion. |
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market losses. |
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inefficient sales. |
Ā | Ā |
low market prices. |