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1)Which of the following is not an effective method to reduce negative externalities?

Patents & Trademarks Discussion Forum

1)Which of the following is not an effective method to reduce negative externalities?

Postby spengler » Sun Apr 01, 2012 4:03 pm

a. relying on voluntary compliance
b. taxing the output of industries that pollute
c. creating legal environmental standards
d. increasing public spending on cleanup and reduction of pollution

2)Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain imposes a $5 tariff on chips. As a result,

a. Spanish consumers of chips and Spanish producers of chips both gain.
b. Spanish consumers of chips gain and Spanish producers of chips lose.
c. Spanish consumers of chips lose and Spanish producers of chips gain.
d. Spanish consumers of chips and Spanish producers of chips both lose.

3)Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is possible?

a. More Danish-produced chips are sold in Denmark.
b. More foreign-produced chips are sold in Denmark.
c. Danish consumers of chips become better off.
d. Total surplus in the Danish chip market increases.

4)Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Chile imposes a $7 tariff on chips. Which of the following outcomes is possible?

a. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips decreases; and the quantity of chips imported by Chile decreases.
b. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile decreases.
c. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile decreases.
d. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile does not change.

5)Honduras is an importer of goose-down pillows. The world price of these pillows is $50. Honduras imposes a $7 tariff on pillows. Honduras is a price-taker in the pillow market. As a result of the tariff, the price of goose-down pillows in Honduras

a. remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases.
b. increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases.
c. increases to a new price between $50 and $57 and the quantity of goose-down pillows purchased in Honduras decreases.
d. increases to a new price above $57 and the quantity of goose-down pillows purchased in Honduras remains the same.

6)What is the difference between command-and-control policies and market-based policies toward externalities?

a. Command-and-control policies provide incentives for private decisionmakers to solve the problems on their own, whereas market-based policies regulate behavior directly.
b. Command-and-control policies rely on taxes, whereas market-based policies rely on quotas.
c. Command-and-control policies regulate behavior directly, whereas market-based policies provide incentives for private decisionmakers to change their behavior.
d. Command-and-control policies are efficient, whereas market-based policies are inefficient.

7)Which of the following statements is not correct?

a. Patents help internalize the externalities associated with technological advances.
b. Economists typically prefer regulations to corrective taxes because regulations provide more incentives for firms to seek continued reductions in pollution.
c. Allowing firms to trade pollution permits will lower the total cost of reducing pollution.
d. A big impediment to implementing the Coase theorem in many cases is high transactions costs.

8)In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

a. it is hard to estimate the market demand curve and thus charge the "right" corrective tax.
b. selling pollution permits create a net increase in pollution.
c. Corrective taxes distort incentives.
d. Corrective taxes provide greater flexibility to firms that can reduce pollution at a low cost.

9)The difference between a corrective tax and a tradable pollution permit is that

a. a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
b. a corrective tax creates a more efficient outcome than a permit.
c. a corrective tax sets the quantity of pollution and a permit sets the price of pollution.
d. a permit creates a more efficient outcome than a corrective tax.

10)In some cases, tradable pollution permits may be better than a corrective tax because

a. pollution permits allow for a market solution while a corrective tax does not.
b. pollution permits generate more revenue for the government than a corrective tax.
c. pollution permits are never preferred over a corrective tax.
d. the government can set a maximum level of pollution using permits.
spengler
 
Posts: 23
Joined: Sat Apr 02, 2011 4:38 am

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