Environmental Economics Final Exam Test Bank
In the case of nonuniformly mixed surface pollutants, the cost effective allocation of emission will occur
when: - (correct Answer) - the marginal costs of concentration reduction are equal for all firms
Which of the following is a characteristic of an efficient property rights structure? a) ambiguity b)
Nonenforceability c) uncertainty d) transferability - (correct Answer) - transferability
When command and control (CAC) costs are compared to costs under an emission trading permit
system for air pollution, most studies have found that: - (correct Answer) - emission trading permit
studying is less costly
As the cost of harvesting increases, the optimal rotation time (in the infinite planning case) will: -
(correct Answer) - increase
Which of the following is NOT one of the 7 most important guidelines for conducting a contingent
valuation study according to the NOAA panel? a) Use the referendum format b) Remind respondents
that a willingness to pay for one program will reduce their ability to buy other things c) Remind users
that there are substitutes for the "commodity" d) Use a follow-up survey to ensure understanding of the
questions e) Use phone interviews rather than personal interviews - (correct Answer) - e) use phone
interviews rather than personal interviews
What is one of the primary sources of inefficiency in the current water system in the United States? -
(correct Answer) - Too much government subsidies for water projects
Consider the situation where a depletable resource is available at a constant marginal cost of extraction
and NO substitute resource is available. The marginal user cost will: - (correct Answer) - rise at the same
rate as the interest
In the western U.S. in the 1800s, the water problems were generally solved by using the: a) Universal
trust system b) res Nullius system c) Open access system d) none of the above - (correct Answer) - None
of the above
solved by using the Prior appropriation system
Consider the example where a depletable resource is available at a constant marginal cost of extraction
and a substitute resource is infinitely available at a higher constant marginal cost. The marginal cost will:
- (correct Answer) - rise at the same rate as the interest rate
Public goods are said to be: - (correct Answer) - nonrival and nonexclusive
, When the discount rate decreases, the efficient allocation of resources is: - (correct Answer) - shifted to
the future
If a forester is planning to replant a forest after it is harvested, the optimal time to harvest will be _____
than in the case when the stand will not be replanted. - (correct Answer) - Shorter
Which of these fishing regulations is inefficient? a) allowing thin-stranded monofilament net b) time
retrictions (limiting fishing to only a few days) c) allowing motors on fishing boats d) allocating a fixed
amount of individual transferable quotas e) none of the above - (correct Answer) - b) Time restrictions
(limiting fishing to only a few days)
Under certain conditions: voluntary, negotiated agreements among private parties generating or being
affected by externalities will lead to the same (and efficient) resource allocations regardless of how
property rights are assigned, as long as transaction costs are negligible. This is known as: - (correct
Answer) - The Coase Theorem
Many of the freeways in the U.S. are overused because: - (correct Answer) - The marginal social cost is
GREATER than the marginal private cost faced by the individual driver
"The marginal user cost should arise at the rate of interest (when marginal extraction cost is constant)."
This is referred to as: - (correct Answer) - Hotelling's Rule
Which country has the lowest gasoline fuel taxes? - (correct Answer) - United States
Which of the following is NOT conducive to the successful operation of a cartel? a) Market demand for
the good is relatively price inelastic b) The cartel supplies all of the world's output of the good c) Cartel
members have substantial cost advantages over non-member producers d) The supply of non-cartel
members is very price elastic e) Cartel members have very similar costs - (correct Answer) - d) The
supply of non-cartel members is very price elastic
In comparing common property versus private property oyster beds, what would we expect to find? -
(correct Answer) - Private property fisherman earn higher average lifetime incomes
In the case of uniformly mixed pollutants, the cost of achieving a given reduction in emissions will be
minimized if and only if: - (correct Answer) - the marginal costs of control are equal for all emitters
Suppose two sources of emission have the same cost of emission reduction functions, but source 2 has a
larger transfer coefficient than source 1. Which source would have the higher optimal amount of
emissions controlled? - (correct Answer) - The optimal amount of emissions controlled is higher for
source 2 than source 1
Consider the nonuniformly mixed fund pollutant that must meet a certain ambient standard. Suppose
that the first pollution source (with a transfer coefficient of a1 = 1.0) wants to buy a pollution permit
from source two (with a transfer coefficient of a2 = 0.5). What will happen to total emissions? - (correct
Answer) - They will decrease
In the case of nonuniformly mixed surface pollutants, the cost effective allocation of emission will occur
when: - (correct Answer) - the marginal costs of concentration reduction are equal for all firms
Which of the following is a characteristic of an efficient property rights structure? a) ambiguity b)
Nonenforceability c) uncertainty d) transferability - (correct Answer) - transferability
When command and control (CAC) costs are compared to costs under an emission trading permit
system for air pollution, most studies have found that: - (correct Answer) - emission trading permit
studying is less costly
As the cost of harvesting increases, the optimal rotation time (in the infinite planning case) will: -
(correct Answer) - increase
Which of the following is NOT one of the 7 most important guidelines for conducting a contingent
valuation study according to the NOAA panel? a) Use the referendum format b) Remind respondents
that a willingness to pay for one program will reduce their ability to buy other things c) Remind users
that there are substitutes for the "commodity" d) Use a follow-up survey to ensure understanding of the
questions e) Use phone interviews rather than personal interviews - (correct Answer) - e) use phone
interviews rather than personal interviews
What is one of the primary sources of inefficiency in the current water system in the United States? -
(correct Answer) - Too much government subsidies for water projects
Consider the situation where a depletable resource is available at a constant marginal cost of extraction
and NO substitute resource is available. The marginal user cost will: - (correct Answer) - rise at the same
rate as the interest
In the western U.S. in the 1800s, the water problems were generally solved by using the: a) Universal
trust system b) res Nullius system c) Open access system d) none of the above - (correct Answer) - None
of the above
solved by using the Prior appropriation system
Consider the example where a depletable resource is available at a constant marginal cost of extraction
and a substitute resource is infinitely available at a higher constant marginal cost. The marginal cost will:
- (correct Answer) - rise at the same rate as the interest rate
Public goods are said to be: - (correct Answer) - nonrival and nonexclusive
, When the discount rate decreases, the efficient allocation of resources is: - (correct Answer) - shifted to
the future
If a forester is planning to replant a forest after it is harvested, the optimal time to harvest will be _____
than in the case when the stand will not be replanted. - (correct Answer) - Shorter
Which of these fishing regulations is inefficient? a) allowing thin-stranded monofilament net b) time
retrictions (limiting fishing to only a few days) c) allowing motors on fishing boats d) allocating a fixed
amount of individual transferable quotas e) none of the above - (correct Answer) - b) Time restrictions
(limiting fishing to only a few days)
Under certain conditions: voluntary, negotiated agreements among private parties generating or being
affected by externalities will lead to the same (and efficient) resource allocations regardless of how
property rights are assigned, as long as transaction costs are negligible. This is known as: - (correct
Answer) - The Coase Theorem
Many of the freeways in the U.S. are overused because: - (correct Answer) - The marginal social cost is
GREATER than the marginal private cost faced by the individual driver
"The marginal user cost should arise at the rate of interest (when marginal extraction cost is constant)."
This is referred to as: - (correct Answer) - Hotelling's Rule
Which country has the lowest gasoline fuel taxes? - (correct Answer) - United States
Which of the following is NOT conducive to the successful operation of a cartel? a) Market demand for
the good is relatively price inelastic b) The cartel supplies all of the world's output of the good c) Cartel
members have substantial cost advantages over non-member producers d) The supply of non-cartel
members is very price elastic e) Cartel members have very similar costs - (correct Answer) - d) The
supply of non-cartel members is very price elastic
In comparing common property versus private property oyster beds, what would we expect to find? -
(correct Answer) - Private property fisherman earn higher average lifetime incomes
In the case of uniformly mixed pollutants, the cost of achieving a given reduction in emissions will be
minimized if and only if: - (correct Answer) - the marginal costs of control are equal for all emitters
Suppose two sources of emission have the same cost of emission reduction functions, but source 2 has a
larger transfer coefficient than source 1. Which source would have the higher optimal amount of
emissions controlled? - (correct Answer) - The optimal amount of emissions controlled is higher for
source 2 than source 1
Consider the nonuniformly mixed fund pollutant that must meet a certain ambient standard. Suppose
that the first pollution source (with a transfer coefficient of a1 = 1.0) wants to buy a pollution permit
from source two (with a transfer coefficient of a2 = 0.5). What will happen to total emissions? - (correct
Answer) - They will decrease
