12. Pollution, a negative externality, is regarded as a form of market failure because:
a. market prices sometimes rise or fall.
b. the market cannot be used to tackle the problem of pollution.
c. firms fail to respond to regulatory controls imposed by the government.
d. the market does not always reflect the true costs of the economic behavior of the agents.
12. Pollution, a negative externality, is regarded as a form of market failure because:
a. market prices sometimes rise or fall.
b. the market cannot be used to tackle the problem of pollution.
c. firms fail to respond to regulatory controls imposed by the government.
d. the market does not always reflect the true costs of the economic behavior of the agents.
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Related questions
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. |