If pollution is reduced below the socially efficient level:
a. the marginal cost of pollution abatement exceeds the marginal benefit of pollution abatement.
b. the marginal cost of pollution abatement is less than the marginal benefit of pollution abatement.
c. the marginal cost of pollution abatement equals the marginal benefit of pollution abatement.
d. nothing can be said about the relationship between the marginal cost and marginal benefit of pollution abatement.
Question 2According to empirical observations, the cost of restricting international trade in the U.S. is much greater than the benefits generated from restriction. In the light of the above observation, which of the following statements is true?
a. The benefits of protecting domestic jobs typically outweigh the costs.
b. Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer.
c. U.S. GDP would be over 14 billion higher with import restrictions than without restrictions.
d. Protection of the U.S. textile and sugar industries means that all consumers pay a lower price for clothing and sugar.
e. Protection of the domestic industries enable the producers to charge lower prices for their products.
Question 3The idea behind comparative advantage reflects the possibility that one party
a. may be able to produce something relatively more efficiently than another.
b. may be able to produce something at a lower opportunity cost than another.
c. may be able to produce something more cheaply than another.
d. all of the above
Question 4An ideal pollution control policy:
a. would reduce pollution to zero.
b. would reduce pollution to the socially efficient level.
c. discourage firms from wasting time developing abatement technologies.
d. reduce pollution as quickly as possible, regardless of the cost.
Question 5Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?
a. Indifference on the government's part to the interests of domestic workers
b. A desire to make other countries suffer
c. Successful lobbying by consumers
d. Successful lobbying by employers and workers
e. The government's preference to safeguard the interest of the producers at the expense of the consumers
Question 6If one nation can produce greater quantities of a good than another nation, it has a(n)
a. comparative advantage in producing that good.
b. absolute advantage in producing that good.
c. absolute advantage, but a comparative disadvantage in producing that good.
d. comparative advantage, but an absolute disadvantage in producing that good.
Question 7Which objective of an ideal pollution control policy would involve the principle of continuing to reduce pollution by one more unit only as long as the value of the improved environmental quality is greater than the value of ordinary goods that are sacrificed?
a. achieving pollution reduction at least cost
b. motivating advances in abatement technology
c. achieving the efficient level of pollution
d. achieving a zero level of pollution
Question 8Employers and workers in the protected industry know that the consequences of protection are principally:
a. lower prices for their output, lower profits for owners, and lower wages for workers.
b. higher prices for their output, lower profits for owners, and lower wages for workers.
c. higher prices for their output, lower profits for owners, and higher wages for workers.
d. lower prices for their output, higher profits for owners, and higher wages for workers.
e. higher prices for their output, higher profits for owners, and higher wages for workers.
Question 9Japan and China can both produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will
a. import guns.
b. have a comparative advantage in guns.
c. have an absolute advantage in guns.
d. have a comparative advantage in rice.
Question 10Under a system of transferable pollution rights, which of the following firms is most likely to purchase a 500 permit to emit a ton of pollutants in to the atmosphere?
a. a non-polluting firm
b. a polluting firm that can reduce emissions at a cost of 500 per ton
c. a polluting firm that can reduce emissions at a cost of 200 per ton
d. a polluting firm that can reduce emissions at a cost of 600 per ton
Question 11Typically, restrictions to save domestic jobs simply redistribute jobs by creating:
a. employment in the protected industry and reducing employment elsewhere.
b. employment in nonprotected industries and reducing employment in the protected industry.
c. inflation in the overall economy.
d. employment in the primary sector at the expense of the secondary sector.
e. labor unions in the protected industries at the expense of employment in nonunionized industries
Question 12What matters most in determining the efficient distribution of production over the world is
a. absolute advantage.
b. efficiency.
c. the stock of resources.
d. comparative advantage.
Question 13A system of transferable pollution rights:
a. increases the quantity of pollution generated.
b. provides firms with an incentive to develop new pollution-abatement technologies.
c. is not as cost-effective in reducing pollution as a system based on compliance standards.
d. is characterized by none of the above.
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