1. In a system of marketable (or tradeable) permits...

a. markets determine how much pollution will be allowed.

b. the level of pollution produced is determined by markets for consumer goods.

c. the ability to pollute is reserved for wealthier consumers.

d. the government establishes an upper limit on the allowable level of pollution.

2. The environmental justice movement posits that

a. there is a trade-off between environmental quality and economic growth.

b. all communities are entitled to equal protection and enforcement of laws that affect the environmental quality of life.

c. all person who commit environmental crimes should be brought to justice.

d. private industry can be trusted to achieve environmental justice voluntarily.

3. The problem of ozone depletion is believed to have been effectively addressed by the

a. the Kyoto Protocol.

b. 1990 amendments to the Clean Air Act.

c. the Montreal Protocol limiting the consumption and production of CFCs.

d. SuperFund legislation of 1980.

4. A negative externality:

a. is any cost above the economic cost.

b. equals the social cost plus the firm's private cost.

c. is an uncompensated cost imposed by an individual or firm on others.

d. equals the opportunity cost minus the social costs.

5. A Pigouvian subsidy is:

a. designed to discourage activities generating externalities.

b. designed to encourage activities generating external benefits.

c. appropriate when the marginal social cost curve is above the marginal cost of production curve.

d. appropriate when the marginal social cost curve and the marginal social benefit curve intersect at an inefficient level.

6. The proposition that if transaction costs are low enough and property rights are well-defined, the private market can achieve an efficient outcome regardless of which of the affected parties hold the property rights is known as the:

a. Coase theorem.

b. property rights paradigm.

c. market rights theorem.

d. green environment paradigm.

7. The socially optimal quantity of pollution is:

a. zero.

b. the quantity whose marginal social cost is equal to zero.

c. the quantity whose marginal social benefit is equal to zero.

d. the quantity whose marginal social cost is equal to the marginal social benefit.

8. Your neighbor Gabriella plays loud music that irritates you and the rest of her neighbors. She agrees to turn down the music by 5 decibels for every $25 she receives from her neighbors, and even though you and your neighbors collectively value reductions of 5 decibels at more than $25 per person, no one pays. This is an example of what type of problem?

a. the holdout problem

b. the assignment problem

c. the free-rider problem

d. the externality-internalization problem

e. the transaction costs and negotiating problems

9. Government subsidizes the production of education in part because there is believed to be a positive externality associated with education. The subsidy does which of the following?

a. shifts the private demand curve to the left

b. shifts the private demand curve to the right

c. shifts the private supply curve to the right

d. shifts the private supply curve to the left

e. None of the answers is correct.

10. The Tragedy of the Commons refers to the concern that

a. public resources will be overused, ultimately leading to their depletion.

b. public resources will be underused, ultimately leading to crowding.

c. public resources will never be privately owned.

d. the public sector is liable for tragedies that occur in common areas.