When social and private costs differ,

a.there is an externality.

b.there will be economic profit in the society.

c.there is not an efficiency problem but an equity problem.

d.society will be inside its production possibilities frontier.

In economic analysis, air pollution, water pollution, and scenery destruction are described as

a.internalities

b.social costs

c.externalities

d.private costs.

The concept of externality refers to the idea that

a.we cannot do anything that does not affect other people.

b.private and internal costs differ.

c.explicit costs differ from implicit costs.

d.decision makers do not internalize all the costs of their choices and private costs differ from social costs.

Suppose cars were taxed according to the amount of pollution they emit per litre of gasoline consumed. We would expect to observe all of the following Exept

a.an increase in quantity demanded for more fuel-efficient automobiles.

b.an increase in the total number of kilometres driven.

c.an increase in production of automobiles that were less polluting.

d.an increase in the prices of less-polluting automobiles and a reduction in prices of more-polluting automobiles.

Editorial writers sometimes argue that the best way to cut pollution would be to jail business executives whose firms cause the pollution. Economists are likely to

a.oppose the idea on the grounds that jail terms are too harsh and fines would be a fairer penalty.

b.favour the proposal since jail terms clearly make decision-makers pay for breaking the law.

c.favour the proposal on the grounds that anything that would help reduce pollution should be done.

d.warn that the optimal quantity of pollution is not zero, and reductions in pollution below the socially optimal level would result in misuse of scarce resources.

The optimal amount of air pollution is

a.found by equating the total benefits from reducing pollution by one more unit with the total costs of reducing pollution by an additional unit.

b. meaningless concept since we cannot put a money value on the environment.

c.found by setting the marginal benefits from reducing pollution by one more unit equal to zero.

d.found by equating the marginal benefits from reducing pollution by one more unit with the marginal costs of reducing pollution by that unit.

Which of the following is NOT a possible solution to the problems of pollution?

a.Regulating the amount of pollution that a firm can produce.

b.Subsidizing the costs of production activities that generate pollution.

c.Converting a resource that is communally owned into a privately owned resource

d.Imposing a tax on polluters that is related to the amount of pollution.

In the process of reducing pollutants in our environment, we are always

a.trading off other goods and services for a cleaner environment.

b.achieving a cleaner environment at no real cost.

c.causing higher levels of unemployment.

d.reallocating resources in an inefficient manner.

With clearly defined property rights, a pollution externality

a.a little more equal.

b.under certain circumstances may be internalized through voluntary contracting

c.will never lead to a misallocation of resources.

d.can only be corrected with government intervention.