Deck 15: Economics, Agriculture, and the Environment

Question 1

The marginal cost of reducing pollution is:

A) the cost of reducing pollution a little bit more
B) the cost of eliminating pollution
C) the price of ethanol, since it is a cleaner fuel than gasoline
D) leading to more pollution now than when our parents were young

Answer 1

A

Question 2

The environment is a:

A) luxury good
B) normal good
C) inferior good
D) cannot define the environment with these categories

Answer 2

A

Question 3

Agriculture results in:

A) no externalities
B) positive externalities of air and water pollution
C) negative externalities of air and water pollution
D) negative externalities of positive rural communities

Answer 3

C

Question 4

Modern agriculture makes use of:

A) agrochemicals
B) fertilizers
C) machinery and equipment
D) all of the other answers

Question 5

The environment is likely to lead to government intervention in:

A) France
B) Mexico
C) Sub-Saharan Africa
D) Southeast Asia

Question 6

The modern environmental movement was started by:

A) Al Gore
B) hippies in California
C) Rachel Carson
D) Richard Nixon

Question 7

Rachel Carson's book, "Silent Spring" was:

A) widely admired
B) widely criticized
C) both A and B
D) neither A nor B

Question 8

The tragedy of the commons occurs when:

A) a publically owned resource is overused
B) a publically owned resource is underused
C) a privately owned resource is overused
D) a privately owned resource is underused

Question 9

To be efficiently used, a resource is:

A) publically owned
B) privately owned
C) either A or B
D) neither A nor B

Question 10

An externality occurs when:

A) production of a good results in impacts external to the market
B) consumption of a good results in impacts external to the market
C) either A or B
D) neither A nor B

Question 11

An externality can be:

A) positive
B) negative
C) both A and B
D) nither A nor B

Question 12

Education is likely to be a:

A) positive externality
B) negative externality
C) both positive and negative externality
D) not enough information to answer

Question 13

Marginal Revenue Product is:

A) additional money earned when consuming a product
B) additional revenue earned from the sale of one additional unit
C) additional productivity from using one more unit of input
D) additional revenue earned from using one more unit of input

Question 14

Marginal Factor cost is:

A) additional cost of consuming a product
B) additional cost of one more unit of output
C) additional cost of one more unit of productivity
D) additinonal cost of using one more unit of input

Question 15

Overutilization of a resource typically occurs:

A) when there is a tragedy of the commons
B) when there is no cost to using the resource
C) when the resource is publically owned
D) all of the other answers

Question 16

Tragedy of the Commons occurs when:

A) private individuals act rationally
B) private individuals act irrationally
C) public groups act rationally
D) public groups acr irrationally

Question 17

Examples of shared resources that are candidates for a tragedy of the commons:

A) grazing land owned by the government
B) public parks
C) roads and highways
D) automobiles

Question 18

Tragedy of the commons occur in:

A) market economies
B) command economies
C) socialist economies
D) all of the other answers

Question 19

Solutions to the tragedy of the commons include:

A) privatization
B) regulation
C) permits to use the resource
D) all of the other answers

Question 20

An externality occurs when:

A) the consumer is unhappy with the product purchased
B) the producer is unhappy with the sale price
C) a third party is affected by a market transaction
D) a third party is affected by a nonmarket transaction

Question 21

In agriculture, negative externalities occur:

A) when using agrochemicals
B) from fertilizer use
C) from animal waste
D) all of the other answers

Question 22

A positive externality from agriculture is:

A) food security
B) healthy, affordable food
C) pleasure from viewing a farm landscape
D) all of the other answers

Question 23

Bees and fruit production are:

A) positive externalities for each other
B) positive externality for bees, negative externality for fruit
C) beneficial, but not an externality
D) positive externality for fruit, negative externality for bees

Question 24

Living in New York City is an example of:

A) positive externality
B) negative externality
C) neither positive nor negative externality
D) depends on the individual

Question 25

Living on a farm in the rural US is an example of:

A) positive externality
B) negative externality
C) neither positive nor negative externality
D) depends on the individual

Question 26

A tax used to internalize an externality is called a:

A) sales tax
B) Pigouvian tax
C) resource tax
D) privatization tax

Question 27

Limitations of a Pigouvian tax include:

A) difficulty of measuring the externality
B) difficulty of measuring economic damage of the externality
C) difficulty of measuring societal preferences for reduction of the externality
D) all of the other three answers

Question 28

Coase suggested that a good solution to an externality is:

A) government regulation
B) bargaining between affected parties
C) Pigouvian tax
D) privatizing all publically owned resources

Question 29

The Coase bargaining solution will:

A) favor the affected party of the extrnality
B) favor the owner of the resource involved
C) be the same, regardless of who owns the resource
D) not enough information to answer

Question 30

Coase's contribution suggests:

A) a larger role for government in externalities
B) an increasing demand for government regulation
C) an increasing role for economists
D) private solutions if negotiating costs are low

Question 31

Limitations to the Coasian bargaining solution include:

A) negotiation costs
B) difficulty in bargaining
C) measurement of impact of externality
D) all of the other answers

Question 32

The demand for environmental goods will:

A) increase with income
B) decrease with income
C) not depend on income
D) increase due to liberal politics

Question 33

Overgrazing is an example of:

A) externality
B) tragedy of the commons
C) pollution
D) Coasian bargaining

Question 34

The optimal level of chemical use in agriculture is equal to:

A) zero
B) the amount that maximizes food production
C) between A and B
D) not enough information to answer

Question 35

Agricultural chemicals:

A) result in a positive externality of greater food production
B) result in a negative externality of ecological damage
C) both A and B
D) neither A nor B

Question 36

Low-cost food is:

A) a positive externality
B) a negative externality
C) a market-based outcome
D) due to low labor costs in the US

Question 37

If all grazing land were privately owned, we would expect to see:

A) overuse
B) underuse
C) efficient use
D) not enough information to answer

Question 38

If agriculture results in water pollution, a solution might be:

A) tragedy of the commons
B) externality
C) Pigouvian tax
D) none of the other answers

Question 39

A solution to animal welfare includes:

A) tragedy of the commons
B) externality
C) Pigouvian tax
D) none of the other answers

Question 40

An externality:

A) is the outcome of a market transaction
B) is the outcome of a government transaction
C) always causes damage
D) should be immediately regulated

Question 41

Garrett Hardin wrote:

A) The Wealth of Nations
B) Silent Spring
C) The Tragedy of the Commons
D) Earth Day

Question 42

The following is likely to increase in importance as incomes rise:

A) food safety
B) nutrition
C) environmental goods
D) all of the other answers

Question 43

A landowner and farmer is likely to use inputs until:

A) MRP > MFC
B) MRP < MFC
C) MRP = MTC
D) MRP = MFC

Question 44

Congestion in urban parking is due to:

A) negative externality
B) tragedy of the commons
C) diminishing returns
D) Pigouvian tax

Question 45

Agriculturalists are subject to:

A) scarcity
B) the law of diminishing marginal returns
C) negative externalities of chemicals and fertilizer
D) all of the other answers

Question 46

A resource that is shared in common is subject to:

A) overuse
B) economies to scale
C) the law of demand
D) Engel curves

Question 47

A farmer or rancher could easily:

A) consider private costs but not social costs of fertilizer use
B) consider social costs but not private costs of fertilizer use
C) consider both private and social costs of fertilizer use
D) not consider either private or social costs of fertilizer use

Question 48

Solving an externality involves:

A) including social costs
B) excluding social costs
C) including private costs
D) excluding private costs

Question 49

Solving a tragedy of the commons involves:

A) privatizing publically owned resources
B) making public privately owned resources
C) integrating private and public resources
D) nationalization of the means of production

Question 50

Externalities are best solved by:

A) command economies
B) market economies
C) low income economies
D) not enough information to answer

Question 51

Define and explain, "market failure." Identify four situations where market failure occurs.

Question 52

Suppose that agricultural chemicals are being used near a suburb, and the "drift" of the chemicals is affecting the gardens and trees of the suburb. Explain how Coasian bargaining could be used to solve this issue.

Question 53

Define and explain, "tragedy of the commons." Explain how cattle grazing on public land could result in a tragedy of the commons.

Question 54

Provide a solution to the tragedy of the commons.

Question 55

Define and explain a Pigouvian tax. What are the strengths and weaknesses of using a Pigouvian tax to solve a resource issue in agriculture?

Question 56

What is an "externality?" How is it related to agricultural production?

Question 57

Analyze the statement, "The optimal level of water pollution is zero." This statement is often made by environmentalists. Are they correct?

Question 58

How will an externality affect the profit maximization decision? Will a firm change production levels when an externality exists? Why or why not?

Question 59

Provide an example of an externality issue in your region. What solutions are available for this externality?

Question 60

Why are environmental issues of special significance for agricultural producers? What policies should be implemented for these issues?