111) Cap-and-trade refers to
A) capping emissions and issuing tradeable emissions permits.
B) capping revenue from selling emissions permits.
C) countries trading fishing rights in international waters.
D) capping taxes on firms that engage in international trade.
E) capping the benefits gained from pollution controls.
112) Issuing marketable permits to firms that produce a product with external costs will give the firms the incentive to
A) declare bankruptcy.
B) buy and sell the permits amongst themselves.
C) escape the problem completely.
D) quit producing the output.
E) increase the external cost because they no longer need to deal with the externality.
113) Firm A and Firm B emit 300 tons of pollution each and each have marketable permits that allow each to emit 100 tons of pollution. If it costs $5,000 for Firm A to eliminate 100 tons of pollution and it costs Firm B $6,000 to eliminate 100 tons of pollution, then
A) Firm B sells its permits to Firm A for a price above $6,000.
B) Firm A sells its permits to Firm B for a price below $6,000.
C) Firm A sells its permits to Firm B for a price above $6,000.
D) Firm B sells its permits to Firm A for a price below $6,000.
E) neither Firm A nor Firm B sells permits because neither has extra permits.
114) Cost effective technologies to reduce pollution are most likely to result from
A) marketable pollution permits.
B) pollution charges.
C) taxes.
D) pollution limits.
E) quotas.
115) Which of the following best describes an externality?
A) something that is external to the economy
B) a sales tax on a good in addition to the market price
C) an effect of a transaction felt by someone other than the buyer or seller
D) anything produced in other countries
E) a change from what is normal
116) The cost of producing an additional unit of a good or service that is borne by the producer of that good or service
A) always equals the benefit the consumer derives from that good or service.
B) equals the cost borne by people other than the producer.
C) is the marginal private cost.
D) is the external cost.
E) is the marginal social cost.
117) The cost of producing an additional unit of a good or service that falls on people other than the producer is
A) the marginal cost.
B) represented by the demand curve.
C) represented by the supply curve.
D) the marginal external cost.
E) the marginal social cost.
118) Which of the following is an example of an activity that creates an external cost?
i.a smoker emitting second-hand smoke
ii.sulfur emitting from a smoke stack
iii.throwing garbage on the roadside
A) i only
B) i and ii
C) iii only
D) ii and iii
E) i, ii, and iii
119) The marginal cost of production that is borne by the entire society is called the marginal
A) private cost.
B) social cost.
C) external cost.
D) public cost.
E) user cost.
120) If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents, then the marginal external cost equals ________ per kilowatt.
A) ten cents
B) nineteen cents
C) four cents
D) zero cents
E) fourteen cents
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