1. Which of the following represents the five important property rights elements that together imply ownership?
   Access, opportunity, management, exclusion and liberty.
   Access, withdrawal, management, liberty, and justice.
   Access, withdrawal, management, exclusion and alienation.
   Private, state, common, government, and open-access.
   

2. True or false: Along a standard supply curve, price and quantity supplied are inversely related--when one increases, the other decreases.
   True.
   False.
   

3. True or false: In the short run marginal costs eventually decline as output rises; this occurs because as output rises, economies of specialization eventually exceed the diseconomies due to congestion.
   True.
   False.
   

4. A profit maximizing firm in a competitive market will set output level where...
   price equals fixed cost.
   fixed cost equal total revenue.
   total costs equal total revenue.
   marginal revenue (price per unit) equals marginal cost.
   

5. Suppose that supply is given by the expression P=10+.2Q, and demand is given by the expression P=110-0.05Q. Assume that marginal external cost is $10. Compute the amount of overproduction due to market failure.
   0.
   10.
   25.
   40.
   

6. Referring back to question 5, compute the implicit price subsidy to consumers that exists in this market as a consequence of unconstrained pollution.
   $0.
   $2.
   $4.
   $6.
   

7. Referring back to question 5, if there is no Pigouvian tax or other regulatory mechanism for controlling pollution, compute the dollar estimate of total external cost created by unconstrained market exchange.
   $0.
   $2,500.
   $4,000.
   $10,000.
   

8. Referring back to question 5, if there is no Pigouvian tax or other regulatory mechanism for controlling pollution, compute the deadweight loss that occurs because of negative externalities.
   $400.
   $250.
   $200.
   $0.
   

9. When is a market for a scarce depletable resource dynamically efficient?
   When total surplus is maximized in the current period.
   When total output is maximized in the current period.
   When the present discounted value of total surplus over time is maximized.
   When price in the current period is minimized.
   

10. True or false: An aspect of recyclable resources is that the secondary market of salvaged or recycled resource acts as a market substitute for the primary market of the virgin resource.
    True.
    False.
    

11. As a natural resource that is traded in a competitive market becomes increasingly scarce (yet demand remains strong), marginal Hotelling rent rises because:
    Marginal Hotelling rent reflects the opportunity cost of consuming a unit of the resource today (the net value of consuming the resource in a future period), and as the resource becomes increasingly scarce, that future net value of consumption becomes larger.
    Marginal extraction costs will rise faster than resource price.
    New extraction technologies, combined with conservation and the development of substitutes, will keep future prices from rising.
    Ownership is not assigned to natural resource commodities that are bought and sold in markets.
    None of the above.
    

12. When dealing with the wild resource stock of marine fisheries, a recurrent problem is...
    the essentially open access nature of property rights regimes in international waters.
    excessive capitalization brought on in part by management based on seasonal closures.
    All of the above.
    None of the above.
    

13. When addressing the differences between a common-pool resource (CPR) and a pure public good, one would note that they differ in the following way:
    A pure public good lacks the characteristic. of multiple individuals appropriating from the resource stock.
    A pure public good lacks rivalry in consumption.
    A CPR lacks rivalry in consumption.
    Free-riding is not a problem associated with the market provision of pure public goods.
    

14. True or false: The invisible hand of Adam Smiths competitive market, where self-interested behavior yields the efficient outcome, applies to both the provision and the maintenance of common-pool resources and pure public goods.
    True.
    False.
    

15. Thomas Malthus, author of An Essay on the Principle of Population, argued the following:
    That agricultural productivity progresses faster than population, thus human kind will never be faced with widespread famine.
    That new agricultural lands can be added faster than human reproduction, hence we need not worry about population growth.
    That energy prices have declined over the long run, which in economic terms reflects little to no scarcity.
    That human population growth would outstrip the growth in agricultural output, leading to widespread famine.
    

16. Which of the following supports the notion that global resource prices may sometimes provide a false indication of resource scarcity?
    None; global resource ownership is well-defined, these rights are enforced, competitive resource markets prevail, and so resource prices reflect the appripriate marginal Hotelling rent.
    Prices do not provide information on the scarcity of unowned and unmarketed resources.
    Profit-maximizing firms have no incentive to charge prices above extraction costs.
    Even in well-functioning competitive markets, prices do not reflect the relative scarcity of goods because of the availability of substitutes.
    

17. True or false: In a benefit/cost analysis of wildlife habitat protection, an element of cost includes the opportunity cost of that habitat area, which may include the income generated by commercial development.
    True.
    False.
    

18. The Pareto-efficient policy criterion differs from Kaldor-Hicks criterion in that...
    The Pareto-efficiency criterion focuses on aggregate net benefits, with no attention to how they are distributed in the population.
    The Kaldor-Hicks efficiency criterion focuses on evaluating how the net benefits from a policy change are distributed in the population.
    The Kaldor-Hicks efficiency criterion focuses on aggregate net benefits, with no attention to how they are distributed in the population.
    None of the above.
    

19. True or false: The Coase theorem states that efficient levels of environmental cleanup can be realized in the absence of regulation as long as polluters rather than those suffering from pollution are given ownership of the resource being polluted.
    True.
    False.
    

20. What must be absent in order for Coasian contracting to yield the net monetary benefit-efficient outcome?
    Profit maximizing firms.
    Concerned citizens.
    High transaction costs and the free rider problem.
    Ownership assigned to the resource in question.
    

21. Which of the following represent limitations from using benefit/cost analysis as the primary yardstick for selecting environmental policy?
    Not all the benefits of environmental protection, cleanup, and conservation are commensurable with monetization.
    The marginal utility of a unit of money, such as a dollar, differs for rich and poor people, yet benefit/cost analysis assumes it is the same.
    Environmental systems are so complex that is probably not possible to correctly quantify the impacts of human activity.
    All of these above are correct.
    

22. Using quantitative risk assessment (QRA) analysis, compute the value of a statistical life if the average wage premium for a riskier job is $1000, and this job is riskier in the sense that the increased annual likelihood of a fatal accident is 1 person for every 5000 full time employees. Assume that the workers are fully informed and the labor market is competitive.
    1 million.
    10 million.
    5 million.
    20 million.
    

23. True or false: Environmental regulations can indirectly increase market concentration and thus decrease competition by increasing firms fixed costs.
    True.
    False.
    

24. Compute the break-even point output level for a particular firm under the following conditions. Price=$100, average variable costs=$25, and annualized fixed costs=$10000.
    133.33
    100.
    80.
    150.
    

25. Now suppose the firm in the question above must install a pollution control device that will raise their annualized fixed costs to $15000. Compute the new break-even output level for our firm.
    133.
    120.
    150.
    200.
    

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