Question 1

Why do water supply problems exist in many parts of the world?
A) Efforts to build large-scale reservoirs in arid countries have stalled due to the enormous expense involved in completing these projects.
B) Water markets are missing or incomplete.
C) Global warming has increased the evaporation rate of water by over 10%.
D) The water supply is unfit for public consumption in many areas due to pollution.

Accepted Answer

The answer of Why do water supply problems exist in...

Question 2

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.

Accepted Answer

When property rights are difficult to assign and enforce, it becomes difficult for markets to allocate resources efficiently. This is because individuals may have conflicting interests and there may be externalities involved, leading to market failure. In such cases, government intervention may be necessary to correct the market inefficiencies. Therefore, option A is the correct answer. Option B is incorrect because courts may not always be able to negotiate efficient outcomes, especially if property rights are unclear. Option C is incorrect because establishing better property rights may not always be feasible or effective, and other solutions may be necessary. Option D is incorrect because government regulation can sometimes improve on the outcomes generated by competitive markets, especially in cases where market failures exist.

Question 3

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

Accepted Answer

High transaction costs in dealing with pollution arise when there are many parties involved, making it difficult to negotiate and enforce agreements. All the options involve multiple stakeholders and complex interactions, leading to high transaction costs.

Question 4

"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.

Accepted Answer

As an economist, one would consider the costs and benefits of the Kyoto Protocol. The costs are significant, as reducing emissions to 1990 levels would require major changes to industries and economies. On the other hand, the expected impact on global temperatures from the Protocol is relatively small. Therefore, an economist would likely agree with the statement that the US should not sign the Kyoto Protocol.

Question 5

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

Accepted Answer

Ignoring market signals can lead to inefficient allocation of resources, while special interest influence can result in regulations that do not adequately protect the environment. Additionally, regulators may not always take into account the costs of implementing and enforcing regulations, which can lead to unintended economic consequences. Therefore, all of the above are examples of deficiencies that can arise from a regulatory approach to pollution.

Question 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.

Accepted Answer

All of the options listed can make it difficult to define and enforce property rights against damaging pollutants. If many polluters are harming one person (A), it can be difficult to pinpoint who is responsible for the damages and ensure that they pay for it. Similarly, if many polluters are harming the same large group of people with the same pollutant (B), it can be difficult to determine who is responsible for compensation when the damage is systematic. Lastly, if the harms are difficult to quantify (C), it can be difficult to determine the appropriate level of compensation or remedy for the damages caused by the pollution.

Question 7

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

Accepted Answer

Cap and trade emission permits have been the most utilized method to reduce emissions of industrial pollution to politically chosen levels, while encouraging efficient choices by polluters. This approach allows the government to set a cap on total allowable emissions and grant permits for a certain amount of emissions to companies. If a company can reduce their emissions below their allotted permit level, they can sell their excess permits to companies that are struggling to stay under their cap. This creates a market incentive for companies to reduce their emissions and rewards those who are able to do so efficiently.

Question 8

When natural resources are not traded, or where markets are not allowed to function as well as they can under a system of well-defined property rights, the problems of ____ and ____ are common.
A) higher taxes; increased regulation
B) waste; scarcity
C) inflation; unemployment
D) slow growth; fluctuating currency values

Accepted Answer

When natural resources are not traded or markets are not allowed to function well, waste and scarcity become common problems. This is because there is no efficient allocation of resources and no incentive for individuals to conserve or use resources efficiently.

Question 9

How are the economic forces that govern renewable resources different than those that govern non-renewable resources?
A) Non-renewable resources must be protected by government policies to prevent depletion.
B) Once non-renewable resources are used up they are gone forever.
C) Both renewable and non-renewable resources have become scarcer over time so the economic forces at work are the same.
D) Renewable resources are not subject to the laws of economics since the scarcity condition no longer holds.

Accepted Answer

The answer of How are the economic forces that govern...

Question 10

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.

Accepted Answer

The answer of The burning of fossil fuels may cause...

Question 11

When the price of gasoline increases substantially, many consumers will
A) turn to fuel saving alternatives like hybrid vehicles.
B) drive less.
C) take public transportation.
D) all of the above are true.

Accepted Answer

When the price of gasoline increases substantially, consumers may opt to use fuel-saving alternatives like hybrid vehicles or electric cars, which often have lower operating costs than gas-powered vehicles. Additionally, driving less or taking public transportation can help consumers save money on gas and reduce their carbon footprint. So, all of the above options are valid choices for consumers to consider.

Question 12

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

Accepted Answer

When many polluters harm a large group of people by emitting the same pollutant, it becomes difficult to determine who is responsible for the harm caused and how much compensation should be paid to the victims. This makes defining and enforcing property rights particularly challenging in such cases.

Question 13

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.

Accepted Answer

The answer of Economic thinking indicates that efficient adaptation strategies...

Question 14

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.

Accepted Answer

Government regulation is not immune to problems such as lack of information and lack of incentives for economic efficiency, which are also prevalent in centrally planned economies. Therefore, the best choice is A. B, C, and D do not accurately describe government regulation and environmental quality.

Question 15

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.

Accepted Answer

The policies to slow global warming under the Kyoto Protocol would require significant fuel-use reductions, which would slow economic growth in most of the world. This would result in opportunity costs, as the resources that could have been used for economic growth would instead be diverted to reducing greenhouse gas emissions.

Question 16

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.

Accepted Answer

This is the only option that is true. Market outcomes are often inefficient when property rights cannot be assigned and enforced, leading to externalities and market failures. Individual property rights can help address some environmental problems, but not all. Environmental regulation can also improve environmental quality. Income levels often have a significant impact on the demand for environmental quality, as higher-income individuals tend to value and demand more environmental amenities.

Question 17

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.

Accepted Answer

None of the given statements are fully supported by current empirical evidence. While there is some evidence that changes in cloud cover may contribute to global warming, the extent of this effect is still uncertain. Likewise, it is clear that the increase in carbon dioxide is a contributing factor to global warming, but it is not the only cause and the timeline for its effects is still uncertain. Similarly, while sea levels are expected to rise due to global warming, the extent of this rise is not yet fully known and is subject to many variables.

Question 18

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.

Accepted Answer

Empirical evidence supports the fact that the earth has warmed a little more than one degree Fahrenheit in the past century. Option A is not supported by empirical evidence and is still subject to ongoing research. Option B is not entirely accurate as there are other factors that contribute to global warming as well. Option C is still hypothetical and subject to ongoing research and debate.

Question 19

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.

Accepted Answer

All of the above statements are true when it comes to environmental policy. Decision makers consider the costs and benefits of their choices, values are subjective which can influence policy decisions, and policy choices can have unintended secondary effects. It is important to consider all of these factors when making environmental policy decisions.

Question 20

"If China and India continue their economic expansion, the world cannot provide enough raw materials without terrible shortages worldwide." Evaluate this statement.
A) True, increased demand from developing countries will swamp the existing supply of resources.
B) True, increased demand from China and India will lead to large shortages in the North America and Europe.
C) False, the shortage will be limited to China and India.
D) False, increasing scarcity will result in higher prices and the deployment of new technologies that increase the efficiency of production, and together these markets forces will help to balance demand and supply worldwide.

Accepted Answer

While it is true that increased demand from China and India will put pressure on the supply of raw materials, the market forces of higher prices and the deployment of new technologies will lead to increased efficiency of production and balance the demand and supply worldwide. This has been proven in the past with other countries like Japan and South Korea experiencing rapid economic growth and demand for resources, but without leading to worldwide shortages.

Quiz 16: Applying the Basics: Special Topics in Economics

Why do water supply problems exist in many parts of the world?

When it is difficult to assign and enforce property rights,

Which of the following would illustrate an example that leads to high transaction costs when dealing with pollution?

"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

Which of the following is an example of a deficiency caused by a regulatory approach to pollution?

It can be difficult to define and enforce property rights against damaging pollutants when

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?

When natural resources are not traded, or where markets are not allowed to function as well as they can under a system of well-defined property rights, the problems of and are common.

How are the economic forces that govern renewable resources different than those that govern non-renewable resources?

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

When the price of gasoline increases substantially, many consumers will

When is the definition and enforcement of property rights especially difficult?

Economic thinking indicates that efficient adaptation strategies to reduce harms from future global warming will

Government regulation is

The opportunity costs of policies to slow global warming under the Kyoto Protocol would include

Which of the following is true?

The current empirical evidence indicates that

Empirical evidence indicates that

When it comes to environmental policy,

"If China and India continue their economic expansion, the world cannot provide enough raw materials without terrible shortages worldwide." Evaluate this statement.