Deck 3: Ecological and Technological Determinants of the Trade-Off Between Economic Activity and Environmental Quality

Question 1

Ecological economists always assume that greater utility is derived from the quality of
the physical environment than from the consumption of goods and services.

Answer 1

False

Question 2

Rational behavior requires making a trade-off between consuming goods and loss in
environmental quality.

Answer 2

True

Question 3

Pollution output, in some form, can never be avoid in the production process.

Answer 3

True

Question 4

The assimilative capacity of the environment is limited in its ability to absorb water and
air wastes, but unlimited with regard to its ability to assimilate air wastes, some of which
can escape to outer space.

Question 5

Stock pollutants have many biological organisms that help degrade them into harmless
substances.

Question 6

Generally, pollution reduces the capacity of an environmental medium to withstand
further pollution.

Question 7

There is always a given minimum amount of economic goods that can be produced
without inflicting damage to the natural environment.

Question 8

For a perfectly competitive market to lead to a socially optimal result, resource ownership
must be clearly defined.

Question 9

A poorly cared-for neighborhood park that reduces the property values of nearby homes
is an example of a negative externality.

Question 10

Ocean fisheries is good example of a common property resource.

Question 11

Total economic value equals the sum of ecosystem services and intrinsic value.

Question 12

The marginal social cost curve is obtained by the vertical summation of the marginal
private and marginal external cost curves.

Question 13

Hardin did recognize that the government can use coercive power to correct externalities
arising from free access to common property resources.

Question 14

Government intervention in enforcing, monitoring, and establishing clearly defined
property rights should not be defined in terms of transaction costs.

Question 15

The Coase theorem states that an optimal level of pollution reduction can be achieved by
assigning property rights only to the pollutee.

Question 16

Which one of the following is the best example of a common property resource?

A) A neighborhood park
B) National defense
C) Open-source software
D) A National Park
E) All of the above

Question 17

The marginal social cost curve is obtained graphically by ….

A) Horizontally adding the marginal private and marginal external cost curves.
B) Vertically adding the marginal private and marginal external cost curves.
C) Horizontally multiplying the marginal private and marginal external cost curves.
D) Vertically multiplying the marginal private and marginal external cost curves.
E) None of the above

Question 18

Which one of the following is most likely to be considered a nonrival good?

A) Television
B) A jacket
C) A hot dog
D) A glass of wine
E) All of the above are nonrival goods

Question 19

Assume that the local museum in your city or town has free entry when it is not too crowded. However, when the number of visitors reaches a threshold level such that it
becomes too crowded it then becomes an example of a(n)

A) Social good.
B) Rival good.
C) Nonrival good.
D) Common property resource
E) None of the above

Question 20

Which one of the following statements about common property resources is false?

A) Social welfare is maximized when private marginal benefits are equal to private
marginal costs.
B) The unregulated outcome does not take into consideration the external costs.
C) The unregulated outcome of a common property resource is inefficient.
D) Government regulation in the form of Pigovian taxes or Individual Transferable
Quotas are potential solutions to the problem of common property resources.
E) Individual profit maximization in the case of common property resources can lead to
the depletion of the resource.

Question 21

Which of the following statements about the tragedy of the commons is false?

A) The tragedy of the commons represents an inefficient outcome.
B) The tragedy of the commons is a type of negative externality.
C) The tragedy of the commons is almost impossible to avoid.
D) The tragedy of the commons can result from free markets with a common property
resource.
E) The term "tragedy of the commons" was popularized by Garret Hardin.

Question 22

Which one of the following is not an example of a negative externality?

A) Second-hand smoke
B) Increased cancer risks in areas with nuclear waste disposal sites
C) Air pollution
D) Untreated human waste
E) Pollination by bees

Question 23

Figure 3A

-Refer to Figure 3A. Assume that one starts at any point that indicates an optimal pollution level. Further assume that there is a technological advancement that shifts the marginal
damage cost downward and to the right. The new optimal level of pollution will be at which
point?

A) Point "V", panel (a)
B) Point "G", panel (c)
C) Point "S", panel (b)
D) Point "R", panel (a)
E) Point "F", panel (c)

Question 24

Figure 3A

-Refer to Figure 3A. Assume that one starts at any point that indicates an optimal pollution level. Further assume that there is an educational campaign of awareness that results in a
change in social preference such that environmental quality is believed to be of utmost
importance - increasing its demand. Which panel or panels would indicate a movement in
the curves reflecting this social preference change?

A) Panel (a) only
B) Panel (b) only
C) Panel (c) only
D) Panels (a) and (c)
E) Panel (a) and (b)

Question 25

Which of the following is true in regard to the optimal level of pollution?

A) What is cheapest for private firms would not be cheapest for society as a whole.
B) With respect to the damage costs there will be a divergence between private and
social costs.
C) In general, the tendency is for private firms to totally ignore the damage costs.
D) In most instances, the economic optimum is associated with a positive level of
pollution emission.
E) All of the above are true.