Question_Doc14_15Dec_13th

Question # 00005679 Posted By: smartwriter Updated on: 12/22/2013 02:36 PM Due on: 12/31/2013
Subject Business Topic General Business Tutorials:
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54) Why do economists believe that it is socially optimal to have some amount of pollution?

1) When negative externalities exist, a voluntary agreement can be negotiated. Which of the

following statements is true?

A) Voluntary agreements usually do not work since the owner has no incentive to negotiate.

B) Transactions costs must be low relative to the expected benefits of reaching an agreement.

C) Voluntary agreements are difficult to negotiate because they usually involve government

intervention.

D) Voluntary agreements always leave the owner worse off.

2) Which of the following would be viewed as a common property problem?

A) Your property is burglarized.

B) Vandals damage your property.

C) People pick all of the flowers in a public park.

D) To be safe you must lock your door at night.

3) All the costs associated with making, reaching, and enforcing agreements are called

A) private costs.

B) internal costs.

C) transaction costs.

D) social costs.

4) The exclusive rights of ownership that allow the use, transfer, and exchange of property are

called

A) common property rights.

B) private property rights.

C) externalities.

D) social benefits.

5) Economic theory suggests that if natural resources can be held as private property, then

A) conservation will be nonexistent.

B) owners will have an incentive not to abuse them.

C) natural resources will be sold off for immediate use.

D) people will simply hold them and refuse to make them available.

6) Common property ownership is most apt to lead to

A) an efficient allocation of resources.

B) production at a rate at which price is less than social cost.

C) a decrease of externalities.

D) an increase in pollution.

7) When no property rights exist,

A) no one has an economic incentive to care for common property, and an externality may well

occur.

B) there will be no production.

C) externalities will be internalized by voluntary arrangements among a small group of parties.

D) society will produce beyond the production possibilities frontier, but the allocation of

resources is not apt to be optimal.

8) Private property rights involve

A) exclusive rights to use, transfer, and exchange the property.

B) exclusive rights to use property, but not to exchange the property.

C) rights to enjoy the property in any way desired but not to transfer or exchange the property.

D) rights granted by the government for renewable terms of 100 years or more.

9) Common property is

A) property that has mineral or oil deposits.

B) a resource that everyone is free to use as much as they want.

C) property owned by a group such as a club.

D) property that has little economic value.

.

10) Buffalo in the United States almost became extinct while cattle have never been close to

extinction. The difference is due to

A) the greater marginal value of a buffalo relative to a head of cattle, leading to greater

"harvesting" of buffalo.

B) the use of private property rights on cattle and common property rights on buffalo.

C) the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of

buffalo.

D) the differences in size between the two animals, and the effect of size differences on the costs

of hunting them.

11) Government intervention will not be necessary when voluntary contracting internalizes an

externality. Which of the following is NOT a necessary condition for this to occur?

A) Well-defined private property rights

B) Low transaction costs

C) Large numbers of individuals involved in the transactions

D) Low contract enforcement costs

12) The costs associated with reaching and enforcing agreements are called

A) private property costs.

B) common property costs.

C) transaction costs.

D) public costs.

13) With defined property rights, an externality

A) can only be corrected with government intervention.

B) will not lead to a misallocation of resources.

C) may be internalized with voluntary contracting, under certain circumstances.

D) must lead to society producing inside its production possibilities frontier.

.

14) A farmer notices that a neighboring rancher's cattle are wandering and destroying some of

his crops. The farmer decides to offer a payment to the rancher if the rancher will reduce the size

of his herd. By doing so, the farmer

A) can be sure that the size of the herd will be reduced and the size of his own harvest will be

increased.

B) indicates to the rancher that there is an opportunity cost to the wandering of the cattle, and

thereby internalizes the externality.

C) inadvertently bears the costs of the externality when the rancher should be liable for the costs.

D) informs the rancher that the cattle have destroyed crops, which should induce the farmer to

build a fence in order to maintain good relations.

15) One difficulty in using voluntary transactions to internalize externalities is that

A) people are motivated by self-interest and are often unwilling to engage in a transaction that

might make another person better off.

B) the government usually will not enforce contracts of this type.

C) transaction costs of coming to an agreement can be very large when numerous people are

involved.

D) people usually don't understand what the real opportunity costs are that they face.

16) Transaction costs are

A) the costs, such as sales taxes, that are imposed by the government.

B) equal to the hourly cost of a lawyer used to write a contract.

C) the costs associated with making, reaching, and enforcing agreements.

D) not true costs because they relate to time rather than real resources.

.

17) In general, pollution exists if

A) people are unconcerned about the hazards associated with pollution.

B) there are poorly defined private property rights.

C) there are poorly defined common property rights.

D) profit-making activity is taken to an extreme.

18) The crux of the problem of pollution is

A) a poorly run Environmental Protection Agency.

B) greed on the part of consumers.

C) greed on the part of producers.

D) poorly defined property rights are expensive to enforce.

19) Changing the ownership of the ocean from common property to private property would

A) ensure that this resource would be allocated in a more efficient manner.

B) ensure that this resource would be allocated in a less efficient manner than under common

property rights.

C) not be economically desirable.

D) result in no appreciable change in efficiency of utilization of this resource.

20) Exclusive rights of ownership that allow the use, transfer, and exchange of property are

called

A) common property rights.

B) nonexclusive property rights.

C) private property rights.

D) public property rights.

21) When no one owns a particular resource,

A) property rights are clearly defined.

B) individuals have legal recourse for any damages caused to their resource.

C) no one has any incentive to consider externality spillovers associated with that resource.

D) positive externalities will arise.

22) Private property rights are

A) an externality.

B) a social cost.

C) property that is owned by everyone and therefore by no one.

D) exclusive rights of ownership.

23) Common property is

A) an externality.

B) a social cost.

C) property that is owned by everyone and therefore by no one.

D) exclusive rights of ownership.

24) Common property often results in

A) a negative externality.

B) a social benefit.

C) a private cost.

D) exclusive rights of ownership.

25) Common property is

A) a resource that everyone is free to use as much as they want.

B) property that belongs to both spouses in a marriage.

C) property owned by a group such as a club or a church.

D) generic property as opposed to specific property.

26) In general, pollution exists in situations in which

A) people are selfish.

B) people refuse to take social responsibility seriously.

C) there are poorly defined private property rights.

D) there exists public property.

27) Joe has broken the mirror of my car. I have legal recourse to sue for damages because of

A) social costs.

B) transactions costs.

C) common property rights.

D) private property rights.

28) Buffalo in the United States almost became extinct while cattle, an animal that provides

similar products, never has been close to extinction. The difference is due to

A) the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of

buffalo.

B) the greater marginal value of a buffalo relative to a steer, leading to the overharvesting of

buffalo.

C) cattle existing in Europe also while buffalo were specific to North America.

D) the use of private property rights on cattle and common property rights on buffalo.

29) Transaction costs are

A) the costs associated with making a transaction that is required by the government.

B) not true costs since they are often not paid.

C) the costs associated with exchanges in the service area.

D) the costs associated with making, reaching and enforcing agreements.

30) Which of the following is a true statement?

A) Externalities cannot be solved by market solutions and always require government action.

B) Externalities would never be a problem if people were willing to comply with government

regulations.

C) Voluntary agreements can solve externality situations by making the party incurring the costs

bear the costs of his or her actions.

D) Externalities can only be handled by government regulation and emission taxes cannot work

effectively.

31) Your neighbor in an apartment complex plays his music very loudly late at night, which

makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put

on your sleep, to never play his music between midnight and 7 AM. By doing so,

A) you have failed to bring about an efficient solution since you should have complained to the

police.

B) you have indicated the cost of the externality. The externality is not internalized even if he

accepts your offer.

C) you have indicated the cost of the externality, which internalizes the externality.

D) you have indicated a willingness to make the external cost a social cost.

32) Which of the following is a true statement?

A) Any property right system will yield a situation in which all externalities are internalized.

B) Voluntary agreements can always yield a situation in which all externalities are internalized.

C) Opportunity costs always exist with whoever has property rights.

D) Opportunity costs turn external costs into social costs.

33) Voluntary agreements may not be a feasible method to internalize an externality when

A) the dollar value of the externality is large.

B) the externality is negative rather than positive.

C) there are significant transaction costs.

D) there are high taxes on the firms that cause the externalities.

34) In which of the following externality situations would it be most likely that voluntary

agreements could be used to internalize an externality?

A) Littering on highways

B) Overharvesting of alligators in Louisiana

C) Poaching of elephants in Africa

D) Trees of one neighbor blocking a view of another

35) Which of the following is NOT a possible solution to the problem of pollution?

A) Converting a resource that is communally owned into a privately owned resource.

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

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

D) Subsidizing the costs of production of activities that generate pollution.

36) The best method to reduce pollution is

A) to never start polluting.

B) to establish private property rights.

C) dependent upon the characteristics of the resources and the transaction costs.

D) dependent upon the quality of government bureaucrats and the level of greed in the society.

37) When there is a resource for which property rights are not well defined and there is a

difference between private costs and social costs, then all but which of the following is a way to

close the difference?

A) The free market system

B) Taxation

C) Subsidization

D) Regulation

38) Common property

A) is owned by everyone.

B) is owned by no one.

C) Neither A nor B are correct.

D) Both A and B are correct.

39) The exclusive rights of ownership of property are generally referred to as

A) level property rights.

B) private property rights.

C) public property rights.

D) common property rights.

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