Exam 3 Questions Flashcards
1
Q
- Imagine the following situation: identically qualified and productive workers are divided equally into men and women (50% men and 50% women). All employers are men and all are prejudiced against women and will not hire them unless they are paid less than men for the same work. Women are willing to work at wages less than men rather than not have a job. There is competition in the labor market. There are a large number of employers. Under these circumstances which of the following will be the long term result?
o a. firms will be segregated into those employing only men or only women
o b. only firms employing men will survive
o c. only firms employing women will survive
o d. segregated and mixed firms may survive and men and women will be different wages
A
o d. segregated and mixed firms may survive and men and women will be different wages
2
Q
- According to Hutt, most discriminatory effects
o a. are the results of insufficient government protection
o b. are the results of government actions in support of certain groups
o c. are the results of historical attitudes now past
o d. are insignificant
A
o b. are the results of government actions in support of certain groups
3
Q
- Trade unions can do which of the following?
o a. raise wages for their members
o b. restrict entry into the union
o c. increase employment in the industry
o d. all of the above
o e. a and b of the above
A
o e. a and b of the above
4
Q
- Assume the same circumstances as in the previous question. Imagine the imposition of an Equal Pay Law that says that you cannot employ women unless you pay them the same rate as men. Under these circumstances, the number of women employed will most likely
o a. increase
o b. decrease
o c. remain the same
A
o b. decrease
5
Q
- Becker’s theory of discrimination draws attention to
o a. how the market process tends to erode discriminatory practices
o b. how the market process tends to reinforce discriminatory employment practices
o c. how government anti-discrimination regulations have improved the position of minorities
o d. how government action tends to reinforce discrimination
A
o a. how the market process tends to erode discriminatory practices
6
Q
- Which of the following is most attractive to the homebuyer in a high inflationary environment (in the U. S.)?
o a. fixed rate mortgages
o b. variable rate mortgages
o c. lifetime mortgages
o d. tea-time mortgages
A
o b. variable rate mortgages
7
Q
- Inflation is always caused by
o a. rising prices
o b. monetary mismanagement
o c. trade unions
o d. greed
A
o b. monetary mismanagement
8
Q
- Which of the following did the McFadden Act do?
o a. prohibited branch banking
o b. made a strict separation between banking and other financial functions
o c. consolidated the currency
o d. all of the above
o e. i and ii of the above
A
o a. prohibited branch banking
9
Q
- Which is the agency that regulates the stock markets?
o a. the EEOC
o b. the SEC
o c. the OFFCCP
o d. the CFTC
A
o b. the SEC
10
Q
- Which of the following is not an official purpose of capital market regulation?
o a. protect the consumer
o b. maintain interest rate ceilings
o c. achieve financial stability
o d. conduct monetary policy
A
o b. maintain interest rate ceilings
11
Q
- The regulation of competition among insurance companies is done at the ___________ level
o a. state
o b. city
o c. county
o d. federal
A
o a. state
12
Q
- A cattle farmer and a corn farmer are located next to each other. The cattle stray into the corn fields and eat the corn. According to the Coase theorem the outcome will not depend on who has the responsibility, unless
o one of them is much richer than the other
o the costs of negotiating are very low
o either of the above
o none of the above matter
A
o one of them is much richer than the other
13
Q
- A cattle farmer and a corn farmer are located next to each other. The cattle stray into the corn fields and eat the corn. According to the Coase theorem
o the cattle farmer should be liable for the damage to the corn farmer
o the corn farmer should be responsible for solving the problem
o either of the above will work
o none of the above will work
A
o either of the above will work
14
Q
- A single seller will try to maximize profits by producing a quantity for which the ____ and this, obviously, implies a ____ than that which would prevail under hypothetical perfect competition.
o a. marginal revenue equals the marginal cost; higher quantity and a lower price
o b. marginal revenue equals the marginal cost; lower quantity and a higher price
o c. marginal revenue is greater than the marginal cost: lower quantity and a higher price
o d. marginal revenue is greater than the marginal cost; higher quantity and a lower price
A
o b. marginal revenue equals the marginal cost; lower quantity and a higher price
15
Q
- Advocates of free trade can confidently make the argument that
o there are no losers from free trade
o when one side gains from trade, the other side loses
o free trade benefits those who trade
o none of the above
A
o free trade benefits those who trade
16
Q
- Advocates of free trade can confidently make the argument that
o there are no losers from free trade
o free trade always leads immediately to the most efficient methods of production
o both of the above
o none of the above
A
o none of the above
17
Q
- Which of the following is the best economic solution to the “Alaskan oil problem”?
o make the oil field the private property of an environmentalist group
o nationalize the Alaskan oil field
o relocate all the wild life
o ban oil production completely
A
o make the oil field the private property of an environmentalist group
18
Q
- All environmental “problems” are essentially about
o a. the inability or unwillingness to define private property rights
o b. differences of opinion about how resources should be used
o c. whether one likes the environment or not
o d. religion
o e. both a and b of the above
A
o e. both a and b of the above
19
Q
- All environmental “problems” are essentially about
o differences of opinion as to how resources ought to be used
o good and evil
o whether one likes the environment or not
o religion
A
o differences of opinion as to how resources ought to be used
20
Q
- What is the usually presumed object of cartel formation?
o a. to make better products
o b. to make higher profits by restricting the sales of the product
o c. to make lower profits by forcing and increase in the sales of the product
o d. none of the above
A
o b. to make higher profits by restricting the sales of the product
21
Q
- If left unregulated particular cartel formations would most probably
o take over the economy
o reach a low level equilibrium
o break down over time
o result in reduced innovation
A
o break down over time
22
Q
- According to the Coase theorem
o a. pollution is never really a problem
o b. there really are no environmental problems
o c. if property rights are well defined and negotiation is possible there is no environmental problem
o d. all environmental problems can be solved
o e. all of the above
A
o c. if property rights are well defined and negotiation is possible there is no environmental problem
23
Q
- Which of the following conditions violate the assumptions necessary for the applicability of the Coase theorem?
o a. there are very large number of people affected
o b. there are only two people affected
o c. the damages are small
o d. the parties are both wealthy
o e. a and d of the above
A
o a. there are very large number of people affected
24
Q
- Which of the following conditions violate the assumptions necessary for the applicability of the Coase theorem?
o a. there are a large number of people affected
o b. there are only two people affected
o c. the damages are small
o d. at least one of the parties has no wealth
o e. a and d of the above
A
o e. a and d of the above
25
Q
- Consider the previous question and the conditions necessary for the Coase theorem. It is easier to obtain a restriction on the free importation of foreign goods than it is to get such restrictions removed. This is most easily explained by the
o a. large number of producers
o b. a case of concentrated benefits from protection and dispersed costs
o c. large number of consumers compared to the relatively small number of producers
o d. stupidity of government officials
o e. b and c of the above
A
o e. b and c of the above
26
Q
- Consider the previous question and the conditions necessary for the Coase theorem. It is easier to obtain a restriction on the free importation of foreign goods than it is to get such restrictions removed. This is most easily explained by the
o large number of producers
o large number of consumers
o large number of consumers compared to the relatively small number of producers
o stupidity of government officials
A
o large number of consumers compared to the relatively small number of producers
27
Q
- Imagine the following situation: identically qualified and productive workers are divided equally into men and women (50% men and 50% women). All employers are men. Not all of the employers are prejudiced against women and a large proportion will hire them for the same work and pay them up to the same wage as men. Women are willing to work for wages less than men rather than not have a job. There is vigorous competition in the labor market. Under these circumstances which of the following will be the long term result?
o a. firms will be segregated into those employing only men or only women
o b. only firms employing men will survive
o c. only firms employing women will survive
o d. segregated and mixed firms may survive and men and women will be paid the same
o e. segregated and mixed firms may survive and women will be paid less than men according to the degree of prejudice
A
o d. segregated and mixed firms may survive and men and women will be paid the same
28
Q
- Imagine the following situation: identically qualified and productive workers are divided equally into men and women (50% men and 50% women). All employers are men. All of the employers are prejudiced against women and will not hire them unless they are paid less than men for the same work. Women are willing to work for wages less than men rather than not have a job. There is vigorous competition in the labor market. Under these circumstances which of the following will be the long term result?
o firms will be segregated into those employing only men or only women
o only firms employing men will survive
o only firms employing women will survive
o segregated and mixed firms may survive and men and women will be paid the same
o segregated and mixed firms may survive and women will be paid less than men according to the degree of prejudice
A
o segregated and mixed firms may survive and women will be paid less than men according to the degree of prejudice
29
Q
- Imagine the following situation: identically qualified and productive workers are divided into men and women (75% men and 25% women). All employers are men. HALF of the employers are prejudiced against women and will not hire them unless they are paid less than men for the same work. The other half will simply hire the best person for the job. (There are enough non discriminators to employ all the women.) Women are willing to work for wages less than men rather than not have a job. There is vigorous competition in the labor market. Under these circumstances which of the following will be the long term result?
o firms will be segregated into those employing only men or only women
o only firms employing men will survive
o only firms employing women will survive
o segregated and mixed firms may survive and men and women will be paid the same
o segregated and mixed firms may survive and women will be paid less than men according to the degree of prejudice
A
o segregated and mixed firms may survive and men and women will be paid the same
30
Q
- Assume there are no non-discriminating employers - all employers are discriminators and will not hire women unless they are paid less. Imagine the imposition of an Equal Pay Law that says that you cannot employ women unless you pay them the same rate as men. Under these circumstances, the number of women employed will most likely
o a. increase
o b. decrease
o c. remain the same
A
o b. decrease
31
Q
- According to the Fisher equation, money interest rates and inflation move
o a. in different directions
o b. in the same direction
o c. apart
o d. none of the above
A
o b. in the same direction
32
Q
- Five friends go to a restaurant. They talk about how to divide the check. Under which of the following possible arrangements would you expect the group to spend the most?
o everyone pays only for what he eats (plus the prorate share of tax and tip)
o they divide the bill in five equal shares
o the richest person pays
o it is impossible to tell
A
o the richest person pays
33
Q
- Five friends go to a restaurant. They talk about how to divide the bill. Under which of the following possible arrangements would you expect the group to spend the least?
o everyone pays only for what he eats (plus the prorate share of tax and tip)
o they divide the bill in five equal shares
o the riches person pays
o it is impossible to tell
A
o everyone pays only for what he eats (plus the prorate share of tax and tip)
34
Q
- I have argued that in order to recommend modifications in life style and manufacturing behavior in order to solve the “problem” of global warming, which of the following must be true?
o a. it must be established that global warming is in fact occurring
o b. it must be established that it is occurring as a result of known and modifiable human behavior
o c. it must be established that such behavior can be modified and that the cost of such modification is not greater than the benefit achieved by the slowing of global warming
o d. all of the above
o e. none of the above
A
o d. all of the above
35
Q
- History teaches us
o a. that free markets are necessary to bring prosperity
o b. that a stable and reliable legal structure that enforces property rights is necessary for the emergence of prosperity
o c. that the above two are both necessary for the emergence of prosperity
A
o c. that the above two are both necessary for the emergence of prosperity
36
Q
- History teaches us
o a. that free markets alone are sufficient to bring prosperity
o b. that free markets alone are not sufficient to bring prosperity
o c. that a stable and reliable legal structure that enforces property rights is necessary for the emergence of prosperity
o d. b and c of the above
A
o d. b and c of the above
37
Q
- Inequality
o is always the result of economic progress
o may occur even in the absence of economic progress
o can occur even if everybody gets richer
o all of the above are true
A
o all of the above are true
38
Q
- Of which of the following can it be argued that it is not really an environmental problem?
o depletion of resources
o pollution of the ocean
o automobile emissions
o smoke pollution
o a and d of the above
A
o a and d of the above
39
Q
- Which of the following is true? [can be confidently asserted on the basis of economic understanding.]
o a. obstacles to free trade are necessary to achieve prosperity
o b. obstacles to free trade have costs that are greater than the benefits
o c. removing obstacles to free trade never has costs
o d. removing obstacles to free trade never has benefits
A
o b. obstacles to free trade have costs that are greater than the benefits
40
Q
- Which of the following is illegal according to U. S. law?
o cartel formation
o price fixing
o beating up competitors
o all of the above
o a and b of the above
A
o all of the above
41
Q
- Which of the following is illegal according to U. S. law?
o a. cartel formation
o b. price fixing
o c. unethical treatment of one’s competitors
o d. all of the above
o a and b of the above
A
o a and b of the above
42
Q
- The Coase theorem can be applied to the question of free trade. Imagine there are a large number of producers and a small number of consumers and that negotiation is easy. Producers are afraid of foreign competition. Under which of the following conditions will free trade result?
o a. the right to impose restrictions on the importation of foreign substitutes is awarded on producers
o b. the right to be free of such restrictions is awarded to consumers
o c. either of the above
o d. none of the above
A
o b. the right to be free of such restrictions is awarded to consumers
43
Q
- The Coase theorem can be applied to the question of free trade. Imagine there are a small number of producers and a small number of consumers and that negotiation is easy. Producers are afraid of foreign competition. Under which of the following conditions will free trade result?
o the right to impose restrictions on the importation of foreign substitutes is awarded on producers
o the right to be free of such restrictions is awarded to consumers
o either of the above
o none of the above
A
o either of the above
44
Q
- Assume the same circumstances as in the previous question. Imagine the imposition of an Equal Pay Law that says that you cannot employ women unless you pay them the same rate as men. Under these circumstances, the number of women employed will most likely
o increase
o decrease
o remain the same
A
o decrease
45
Q
- With regard to immigration policy a type II error occurs when
o a. an undesirable (dangerous) immigrant is admitted
o b. a desirable (productive, peaceful) immigrant is refused admission
o c. an immigrant lies about his/her age
o d. a and b of the above
A
o b. a desirable (productive, peaceful) immigrant is refused admission
46
Q
- Which of the following can be controlled by the Federal Reserve System?
o the federal funds rate
o the quantity of bank reserves
o either one of the above, but not both together
o none of the above
A
o either one of the above, but not both together
47
Q
- Which of the following financial functions are regulated by the federal government?
o Insurance
o Banking
o Investment banking
o stock trading
o bond trading
o all of the above
A
o all of the above
48
Q
- Which of the following is responsible for conducting monetary policy?
o The open market committee of the Federal Reserve System
o The Treasury secretary
o The state banking commissions
o The Congress
A
o The open market committee of the Federal Reserve System
49
Q
- Which of the following policies always has consequence that are the opposite of what is intended?
o safety regulation
o the abolition of tariffs
o price fixing
o income subsidies
A
o price fixing
50
Q
- Which of the following phenomena is responsible for both the rising cost of health care and the impending crises in social security funding?
o the aging American population
o the rising rate of immigration
o the price fixing activities of professional associations
o the Iraq war
A
o the aging American population
51
Q
- Which of the following is likely to be the most stable monopoly?
o Microsoft
o The U.S. government
o General Electric
o IBM
A
o The U.S. government
52
Q
- Which of the following is true?
o a. all environmental problems could be solved if the state had enough power
o b. environmental problems are without exception the result of an inability and/or unwillingness to define and enforce property rights
o c. the only way to solve environmental problems is to have the state decide how resources ought to be used
o d. none of the above
A
o b. environmental problems are without exception the result of an inability and/or unwillingness to define and enforce property rights
53
Q
- Consider the previous question. Because of this Thomas Jefferson was led to say which of the following?
o the price of democracy is seldom paid
o the price of liberty is eternal vigilance
o the British are coming
o democracy is sorely overrated
A
o the price of liberty is eternal vigilance
54
Q
- Under perfectly discriminating monopoly
o a. every customer would be charged the same price
o b. every customer would be charged a different price
o c. every customer would be charged the maximum price he/she is prepared to pay
o d. none of the above
A
o c. every customer would be charged the maximum price he/she is prepared to pay
55
Q
- Trade unions and professional associations have which of the following in common?
o a. they both directly control the price of the services they sell
o b. they both directly control the quantity of the services they sell
o c. they both engage in practices that result in an increase in the price of the services they sell
o d. b and c of the above
o e. a and c of the above
A
o c. they both engage in practices that result in an increase in the price of the services they sell
56
Q
- The problem of deciding how much air safety is enough or how much air safety is optimal is complicated by
o a. incentive problems
o b. knowledge problems
o c. both of the above
o d. none of the above
A
o c. both of the above
57
Q
- The price of health care in the United States will not decrease unless somehow there is a
o a decrease the demand
o an increase the supply
o either of both of the above
o none or the above will work
A
o either of both of the above
58
Q
- The most obvious effect of rent control is
o a lower average price of housing
o lower mortgage rates for housing
o higher mortgage rates for housing
o a lower rate of return for landlords
A
o a lower rate of return for landlords
59
Q
- Landlords can increase the return on rent controlled buildings by
o reducing the level of maintenance
o increasing the level of maintenance
o postponing interest payments
o none of the above
A
o reducing the level of maintenance
60
Q
- The most fundamental question facing the issue of endangered species is
o are animals property?
o are animals smart?
o can animals think?
o should we eat animals?
A
o are animals property?
61
Q
- The imposition of a minimum wage below the (free) market wage will
o increase unemployment
o decrease unemployment
o have no effect
o first increase then decrease unemployment
A
o have no effect
62
Q
- If the Food and Drug Administration slowed down the drug approval process for pharmaceutical drugs it would risk the occurrence of more
o type I errors
o type II errors
o both of the above
o none of the above
A
o type II errors
63
Q
- Economic reasoning suggests that privatizing national parks is likely to ___ the chances of survival of endangered species found in the parks when the survival of the species are valued by a large number of wealthy people
o decrease
o increase
o make no difference to
o none of the above
A
o increase
64
Q
- Which of the following are likely effects of licensing of doctors?
o a. reduce the number of doctors
o b. increase the earnings of doctors
o c. increase the availability of doctors
o d. all of the above
o e. a and b of the above
A
o e. a and b of the above
65
Q
- Which of the following occupations are licensed?
o a. economists
o b. private-school teachers
o c. taxi drivers
o d. doctors
o e. all of the above
o f. c and d of the above
A
o f. c and d of the above
66
Q
- According to the dynamic view of monopoly, what constitutes a credible barrier to entry?
o a. large size of the incumbent
o b. government mandated licensing
o c. government restrictions on international trade
o d. inability to advertise
o e. all of the above
o f. b and c of the above
A
o f. b and c of the above
67
Q
- Which of the following U.S. educational setups represents the one with the highest degree of accountability to parents?
o charter schools
o public schools
o private scholarships
o all of the above are equal
A
o private scholarships
68
Q
- According to the public choice way of thinking
o a. wealthy individuals are likely to form alliances with government to subvert competition
o b. wealthy individuals can never form alliances with government to subvert competition
o c. poor individuals are likely to form alliances with government to subvert competition
o d. poor individuals can never form alliances with government to subvert competition
A
o a. wealthy individuals are likely to form alliances with government to subvert competition
69
Q
- Which of the following is most likely true? At current levels of expenditure, the marginal benefits of airline safety
o are rising sharply
o are falling
o are constant
o are rising sharply
A
o are falling
70
Q
- Price fixing, if it has any effects, always has effects that are ___ what is intended.
o an exaggeration of
o equal to
o the opposite of
o less than
A
o the opposite of
71
Q
- Which of the following is an accurate statement?
o a. prosperity, property rights and the rule of law go together
o b. prosperity without democracy is impossible
o c. prosperity depends on large amounts of committed government planning
o d. free speech has nothing to do with property rights
A
o a. prosperity, property rights and the rule of law go together
72
Q
- Decriminalizing the purchase and sale of healthy kidneys would benefit
o the buyer
o the seller
o the doctor
o all of the above
A
o all of the above
73
Q
- Halving the level of the minimum wage will have which of the following effects? (You may assume the minimum wage is above the market wage).
o it will increase the level of employment
o it will increase the degree of poverty in the economy
o both of the above
o none of the above
A
o it will increase the level of employment
74
Q
- To assume that all regulators try their best to serve the public interest even when it conflicts with their own private interest is consistent with which of the following approaches to regulation theory?
o the public choice approach
o the public welfare approach
o both of the above
o none of the above
A
o the public welfare approach
75
Q
- What identifies a natural monopoly?
o a. an upward sloping average cost curve
o b. an average cost curve that slopes downwards over the entire relevant range
o c. an upward sloping marginal revenue curve
o d. a downward sloping marginal revenue curve
o e. a downward sloping demand curve
A
o b. an average cost curve that slopes downwards over the entire relevant range
76
Q
- Which of the following is the most difficult environmental problem to solve
o the drilling for oil in Alaska
o the classic upstream- downstream problem
o wild life preservation
o automobile emissions
A
o automobile emissions
77
Q
- Which of the following is true?
o obstacles to free trade are necessary to achieve prosperity
o obstacles to free trade have costs that are greater than the benefits
o removing obstacles to free trade never has costs
o removing obstacles to free trade never has benefits
A
o obstacles to free trade have costs that are greater than the benefits
78
Q
- Perfect competition is considered to be the most efficient possible outcome, this is because
o it encourages technological progress
o it encourages the greatest degree of producer response to differing customer needs
o it ensures that the product is produced and sold at the lowest possible cost under a given technology
o all of the above
A
o it ensures that the product is produced and sold at the lowest possible cost under a given technology
79
Q
- A universal economic law of action is that maximum benefits are obtained where
o a. marginal benefit minus marginal cost equals zero
o b. marginal cost equals marginal benefit
o c. marginal cost is at a minimum
o d. average cost is at a minimum
o e. a and b of the above
A
o e. a and b of the above
80
Q
- Rising marginal cost gives rise to
o economies of scale
o economies of scope
o barriers to entry
o none of the above
A
o none of the above
81
Q
- According to the Coase Theorem
o one should always award pollution rights to the victim
o one should always award pollution rights to the poorest party
o the state should decide how resources should be used
o if transactions costs are very small the pattern of resource usage will not depend on who has the property right to use the resource in question
o resource usage is always dependent on who has the property rights
A
o if transactions costs are very small the pattern of resource usage will not depend on who has the property right to use the resource in question
82
Q
- Imagine that Argentinean beef could be imported tariff-free and sold at 50% of the current market price. Imagine that this means that consumers as a group could gain much more in savings from cheap beef than domestic producers as a group would lose. Why don’t consumers simply pay the producers to have the tariff abolished?
o because consumers are very numerous and would be extremely costly to organize for such a project
o because producers can’t be bought, they are patriots
o because consumers don’t like beef
o a and b of the above
A
o because consumers are very numerous and would be extremely costly to organize for such a project
83
Q
- Applying the Coase Theorem to the question of drilling for oil in an Alaskan wildlife preserve it would be appropriate to
o pass a law requiring drilling to occur
o pass a law prohibiting drilling
o award an environmental organization title to the wildlife preserve
o nationalize the preserve
A
o award an environmental organization title to the wildlife preserve
84
Q
- Free markets work because they
o economize on information
o provide incentives to people to do their best
o encourage a division of labor
o all of the above
A
o all of the above
85
Q
- With regard to immigration policy a type I error occurs when
o an undesirable (dangerous) immigrant is admitted
o a desirable (productive, peaceful) immigrant is refused admission
o an immigrant lies about his/her age
o a and b of the above
A
o an undesirable (dangerous) immigrant is admitted
86
Q
- Which of the following most closely resembles a market solution to the problem of air pollution?
o the establishment and sale of pollution rights
o the imposition of separate pollution limits on each business
o nationalizing the air
o rewarding businesses with tax-payer money for reducing pollution
A
o the establishment and sale of pollution rights
87
Q
- In the chapter on discrimination in Friedman’s Capitalism and Freedom, which of the following arguments is made
o discrimination according to race or gender is endemic and needs to be countered by state action
o discrimination can best be tackled by prosecuting the discriminators
o affirmative action policies are justified
o the market system tends to punish discriminators who deny themselves the use of the productive labor of minorities
o a, b and c of the above
A
o the market system tends to punish discriminators who deny themselves the use of the productive labor of minorities
88
Q
- The most likely explanation for the recent imposition of a tariff on the importation of steel is
o many small domestic steel producers can be expected to become more efficient as a result
o it is politically expedient to protect the domestic steel producers from foreign competition
o foreign steel producers compete unfairly
o a and c of the above
A
o it is politically expedient to protect the domestic steel producers from foreign competition
89
Q
- Some inequality
o is always the result of economic progress
o is not necessarily the result of economic progress
o is only sometimes the result of economic progress
o is never the result of economic progress
A
o is always the result of economic progress
90
Q
- The Coase theorem suggests that private solutions to the externality problem
o a. will always allocate resources efficiently if private parties can bargain without cost.
o b. are effective under all conditions.
o c. are only efficient when there are negative externalities.
o d. may not be possible because of the distribution of property rights
A
o a. will always allocate resources efficiently if private parties can bargain without cost.
91
Q
- Which of the following most resembles the upstream-downstream problem?
o a. the cattle-corn problem
o b. the automobile emissions problem
o c. the oil drilling problem
o d. global warming
A
o a. the cattle-corn problem
92
Q
- Which of the following can be argued is truly an environmental problem?
o a. clean air
o b. endangered species
o c. depleteable resources
o d. pornography
A
o a. clean air
93
Q
- Which of the following is not true?
o a. all environmental problems could be solved if the state had enough power
o b. environmental problems are without exception the result of an inability and/or unwillingness to define and enforce property rights
o c. environmental problems are basically about the question of how scarce resources ought to be used
o d. the only way to solve environmental problems is to have the state decide how resources ought to be used
o e. a and d of the above
A
o e. a and d of the above
94
Q
- Which of the following choices suggests that the private market can be effective in dealing with externalities?
o a. the “invisible hand”
o b. the law of diminishing social returns
o c. the Coase theorem
o d. technology policy
A
o c. the Coase theorem
95
Q
- Which of the following does Coase Theorem reasoning suggest?
o a. it is easier to obtain a restriction on the free importation of foreign goods than it is to get such restrictions removed
o b. it is easy to bribe politicians
o c. larger groups are likely to be more influential than smaller groups when both groups gain the same as a group
o d. there is no such thing as an environmental problem
A
o a. it is easier to obtain a restriction on the free importation of foreign goods than it is to get such restrictions removed
96
Q
- Applying the Coase Theorem to the question of drilling for oil in an Alaskan wildlife preserve could be solved by
o a. passing a law requiring drilling to occur
o b. passing a law prohibiting drilling
o c. establishing property rights in the preserve
o d. nationalizing the preserve
A
o c. establishing property rights in the preserve
97
Q
- Dick owns a dog whose barking annoys Dick’s neighbor Jane. Dick receives personal benefit from owning the dog, and Jane bears a cost of Dick’s ownership of the dog. Assuming Jane has the legal right to peace and quiet, which of the following statements is true?
o a. if Dick’s benefit exceeds Jane’s cost, government intervention is necessary.
o b. Dick will pay to keep his dog if his benefit exceeds Jane’s cost.
o c. if Jane’s cost exceeds Dick’s benefit, Dick will pay Jane to keep his dog.
o d. if Jane has legal right to peace and quiet, she only has to pay Dick when her cost is below his benefit.
A
o b. Dick will pay to keep his dog if his benefit exceeds Jane’s cost.
98
Q
- Private solutions often are not possible due to the costs of negotiating and enforcing these solutions. Such costs are called
o a. transaction costs.
o b. opportunity costs.
o c. deadweight loss.
o d. Pigovian taxes
A
o a. transaction costs.
