MCQOPTIONS
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MCQOPTIONS
This section includes 19 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Which of the following is true regarding tradable pollution permits and Pigouvian taxes ? |
| A. | All of these answers are true |
| B. | Pigouvian taxes and tradable pollution permits create an efficient market for pollution. |
| C. | Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest |
| D. | To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights. |
| E. | Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits. |
| Answer» C. Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest | |
| 2. |
Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality ? |
| A. | costs incurred due to lawyers’ fees |
| B. | costs incurred to reduce the pollution |
| C. | costs incurred to enforce the agreement |
| D. | costs incurred due to a large number of parties affected by the externality |
| E. | All of these answers are considered transaction costs |
| Answer» C. costs incurred to enforce the agreement | |
| 3. |
When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students it is an example of ? |
| A. | an attempt to internalize a positive externality |
| B. | an attempt to internalize a negative externality |
| C. | a Pigouvian tax |
| D. | a command-and-control policy |
| Answer» B. an attempt to internalize a negative externality | |
| 4. |
When an individual buys a car in a congested urban area, it generates ? |
| A. | a positive externality |
| B. | a technology spillover |
| C. | an efficient market outcome. |
| D. | a negative externality |
| Answer» E. | |
| 5. |
Tradable pollution permits ? |
| A. | reduce the incentive for technological innovations to further reduce pollution. |
| B. | set the price of pollution. |
| C. | determine the demand for pollution rights. |
| D. | Set the quantity of pollution |
| Answer» E. | |
| 6. |
To internalize a positive externality an appropriate public policy response would be to ? |
| A. | ban the good creating the externality |
| B. | tax the good |
| C. | subsidize the good |
| D. | have the government produce the good until the value of an additional unit is zero |
| Answer» D. have the government produce the good until the value of an additional unit is zero | |
| 7. |
To internalize a negative externality an appropriate public policy response would be to ? |
| A. | have the government take over the production of the good causing the externality |
| B. | ban the production of all goods creating negative externalities |
| C. | tax the good |
| D. | subsidize the good |
| Answer» D. subsidize the good | |
| 8. |
The most efficient pollution control system would ensure that ? |
| A. | the regulators decide how much each polluter should reduce its pollution. |
| B. | no pollution of the environment is tolerated |
| C. | each polluter reduces its pollution an equal amount |
| D. | the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount |
| Answer» E. | |
| 9. |
The government engages in a technology policy ? |
| A. | by allocating tradable technology permits to high technology industry. |
| B. | to internalize the positive externality associated with technology-enhancing industries. |
| C. | to help stimulate private solution to the technology externality |
| D. | to internalize the negative externality associated with industrial pollution |
| Answer» C. to help stimulate private solution to the technology externality | |
| 10. |
The gas-guzzler tax that is placed on new vehicles that are very fuel inefficient is an example of ? |
| A. | a tradeable pollution permits. |
| B. | an attempt to internalize a positive externality |
| C. | an application of the Coase theorem |
| D. | an attempt to internalize a negative externality. |
| Answer» E. | |
| 11. |
Roberto and Thomas live in a university hall of residence Roberto values playing loud music at a value of €100. Thomas values Pease and quiet at a value of €150. Which of the following statements is true ? |
| A. | It is efficient for Roberto to stop playing loud music regardless of who has the property right to the level of sound |
| B. | it is efficient for Roberto to continue to play loud music |
| C. | It is efficient for Roberto to stop playing loud music only if Thomas has the property right to peace and quiet |
| D. | It is efficient for Roberto to stop playing loud music only if Roberto has the property right to play loud music |
| Answer» B. it is efficient for Roberto to continue to play loud music | |
| 12. |
Roberto and Thomas live in a university hall of residence. Reberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs ? |
| A. | Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music |
| B. | Roberto will pay Thomas €150 and Roberto will continue to play loud music |
| C. | Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music |
| D. | Roberto will pay Thomas €100 and Roberto will stop playing loud music |
| Answer» D. Roberto will pay Thomas €100 and Roberto will stop playing loud music | |
| 13. |
An externality is ? |
| A. | the benefit that accrues to the buyer in a market |
| B. | the cost that accrues to the seller in a market |
| C. | none of these answers |
| D. | the compensation paid to a firm’s external consultants. |
| E. | The uncompensated impact of one person’s actions on the well-being of a bystander |
| Answer» F. | |
| 14. |
According to the Coase theorem, private parties can solve the problem of externalities if ? |
| A. | there are no transaction costs. |
| B. | each affected party has equal power in the negotiations. |
| C. | the party affected by the externality has the initial property right to be left alone. |
| D. | There are a large number of affected parties. |
| E. | the government requires them to negotiate with each other |
| Answer» B. each affected party has equal power in the negotiations. | |
| 15. |
A positive externality (that has not been internalized) caused the ? |
| A. | equilibrium quantity to exceed the optimal quantity |
| B. | equilibrium quantity to equal the optimal quantity |
| C. | optimal quantity to exceed the equilibrium quantity |
| D. | equilibrium quantity to be either above or below the optimal quantity |
| Answer» D. equilibrium quantity to be either above or below the optimal quantity | |
| 16. |
A positive externality generates ? |
| A. | a social cost curve that is above the supply curve (private cost curve) for a good |
| B. | none of these answers |
| C. | a social value curve that is above the demand curve (private value curve) for good |
| D. | a social value curve that is below the demand curve (private value curve) for a good |
| Answer» D. a social value curve that is below the demand curve (private value curve) for a good | |
| 17. |
A pigovian tax on pollution ? |
| A. | Sets the quantity of pollution |
| B. | reduces the incentive for technological innovations to further reduce pollution |
| C. | Sets the price of pollution |
| D. | determines the demand for pollution rights. |
| Answer» D. determines the demand for pollution rights. | |
| 18. |
A negative externality (that has not been internalized) causes the ? |
| A. | optimal quantity to exceed the equilibrium quantity. |
| B. | equilibrium quantity to be either above or below the optimal quantity |
| C. | equilibrium quantity to equal the optimal quantity |
| D. | equilibrium quantity to exceed the optimal quantity |
| Answer» E. | |
| 19. |
A negative externality generates ? |
| A. | a social cost curve that is below the supply curve (private cost curve) for a good |
| B. | none of these answers |
| C. | a social cost curve that is below the supply curve (private cost curve) for a good |
| D. | a social value curve that is above the demand curve (private value curve) for a good |
| Answer» B. none of these answers | |