EC238 - final exam review
When there are external costs ________.
A. markets deliver inefficient outcomes.
B. output is too high.
C. the price is too low.
D. All of the above. - correct answer D. all of the above
A lower discount rate, all else equal, ________.
A. decreases the net present value.
B. increases the net present value.
C. has no impact on the net present value.
D. All of the above.
E. None of the above. - correct answer B. increases the net present value
An environmental project gives net benefits of $1000 one year from now, $1200 two yearsfrom now and
$800 three years from now. What is the net present value of the project at adiscount rate of 10%
(rounded to the nearest dollar)?
A. $3321
B. $2455
C. $3690
D. $2502
E. None of the above. - correct answer D. $2502
Explanation: 1000/1.1 + 1200/1.1^2+ 800/1.1^3≈ 2502
Averting costs are __________________.
A. a type of revealed preference
B. purchased market goods that affect a consumer's exposure to the ambientenvironment
,C. one way to estimate willingness-to-pay
D. All of the above.
E. None of the above. - correct answer D. all of the above
Contingent valuation is __________________.
A. a type of revealed preference
B. a direct method of estimating damages
C. a survey approach asking consumers to answer questions regarding theirwillingness to pay
D. All of the above.
E. None of the above - correct answer B. A direct method of estimating damages
c. a survey approach asking consumers to answer questions regarding their willingness to pay.
There are two categories of willingness to pay estimation methods, and these are called:
A. market and non-market valuation.
B. revealed preference and stated preference approaches.
C. voluntary and mandatory responses.
D. monetized and non-monetized costs. - correct answer B. revealed presence and
stated presence approaches.
A complication associated with estimating willingness to pay through revealed preferencemethods is:
A. individual measures of willingness to pay may underestimate true benefits due to factthat some
people may be willing to pay for benefits to others.
B. willingness to pay depends on ability to pay.
C. both A and B are complications associated with willingness to pay methods.
D. neither A nor B are complications associated with willingness to pay methods. - correct answer
C. both A and B are complications associated with willingness to pay methods.
A region is considering two sites on which to locate a new wastewater treatment plant. Site Awas
purchased five years ago for a project that was never completed and the region initiallypaid $925,000
for the land. The current market value of Site A is $1,250,000. Site B is a plotthe region would have to
purchase for $650,000. What is the social opportunity cost of eachsite?
, A. The social opportunity cost should be stated for the project, not each site and wouldbe equal to the
lowest value for either site, $650,000.
B. $1,250,000 for Site A; $650,000 for Site B
C. $925,000 for Site A; $650,000 for Site B
D. $0 for Site A; $650,000 for Site B
E. None of the above. - correct answer B. $1,250,000 for Site A; $650,000 for Site B
An example of a cost to a private group that is not a cost from the standpoint of society is___________.
A. the cost of inputs
B. a tax
C. an externality
D. opportunity cost
E. None of the above - correct answer B. a Tax
Benefit-cost analysis incorporates ________ valuation of all inputs and outputs related to theproject
whether they are transacted in private markets or not.
A. market
B. private
C. social
D. non-market
E. None of the above - correct answer C. social
An environmental program is ________ if the net effect of that policy has proportionally________ effect
on low-income people as on high-income people.
A. proportional; less
B. regressive; greater
C. regressive; the same
D. regressive; less
E. None of the above - correct answer D. regressive; less
When there are external costs ________.
A. markets deliver inefficient outcomes.
B. output is too high.
C. the price is too low.
D. All of the above. - correct answer D. all of the above
A lower discount rate, all else equal, ________.
A. decreases the net present value.
B. increases the net present value.
C. has no impact on the net present value.
D. All of the above.
E. None of the above. - correct answer B. increases the net present value
An environmental project gives net benefits of $1000 one year from now, $1200 two yearsfrom now and
$800 three years from now. What is the net present value of the project at adiscount rate of 10%
(rounded to the nearest dollar)?
A. $3321
B. $2455
C. $3690
D. $2502
E. None of the above. - correct answer D. $2502
Explanation: 1000/1.1 + 1200/1.1^2+ 800/1.1^3≈ 2502
Averting costs are __________________.
A. a type of revealed preference
B. purchased market goods that affect a consumer's exposure to the ambientenvironment
,C. one way to estimate willingness-to-pay
D. All of the above.
E. None of the above. - correct answer D. all of the above
Contingent valuation is __________________.
A. a type of revealed preference
B. a direct method of estimating damages
C. a survey approach asking consumers to answer questions regarding theirwillingness to pay
D. All of the above.
E. None of the above - correct answer B. A direct method of estimating damages
c. a survey approach asking consumers to answer questions regarding their willingness to pay.
There are two categories of willingness to pay estimation methods, and these are called:
A. market and non-market valuation.
B. revealed preference and stated preference approaches.
C. voluntary and mandatory responses.
D. monetized and non-monetized costs. - correct answer B. revealed presence and
stated presence approaches.
A complication associated with estimating willingness to pay through revealed preferencemethods is:
A. individual measures of willingness to pay may underestimate true benefits due to factthat some
people may be willing to pay for benefits to others.
B. willingness to pay depends on ability to pay.
C. both A and B are complications associated with willingness to pay methods.
D. neither A nor B are complications associated with willingness to pay methods. - correct answer
C. both A and B are complications associated with willingness to pay methods.
A region is considering two sites on which to locate a new wastewater treatment plant. Site Awas
purchased five years ago for a project that was never completed and the region initiallypaid $925,000
for the land. The current market value of Site A is $1,250,000. Site B is a plotthe region would have to
purchase for $650,000. What is the social opportunity cost of eachsite?
, A. The social opportunity cost should be stated for the project, not each site and wouldbe equal to the
lowest value for either site, $650,000.
B. $1,250,000 for Site A; $650,000 for Site B
C. $925,000 for Site A; $650,000 for Site B
D. $0 for Site A; $650,000 for Site B
E. None of the above. - correct answer B. $1,250,000 for Site A; $650,000 for Site B
An example of a cost to a private group that is not a cost from the standpoint of society is___________.
A. the cost of inputs
B. a tax
C. an externality
D. opportunity cost
E. None of the above - correct answer B. a Tax
Benefit-cost analysis incorporates ________ valuation of all inputs and outputs related to theproject
whether they are transacted in private markets or not.
A. market
B. private
C. social
D. non-market
E. None of the above - correct answer C. social
An environmental program is ________ if the net effect of that policy has proportionally________ effect
on low-income people as on high-income people.
A. proportional; less
B. regressive; greater
C. regressive; the same
D. regressive; less
E. None of the above - correct answer D. regressive; less
