AS Economics: Externalities and Government Policy

Under a marketable pollution permits system
1. the government imposes a tax on each unit of pollution produced by a firm
2. the government imposes a quota on the amount of pollution a firm can produce using specific technology
3. the government subsidises each unit of waste produced
4. the government assigns each firm rights to pollute a certain amount, and these rights are transferable / bought and sold between firms
Marketable pollution permits are likely to result in
1. an increase in the level of pollution
2. no effect on the level of pollution
3. severe pollution in some areas
4. a shift of pollution reduction towards higher cost firms
A tax or charge equal to the spillover cost per unit of waste is known as
1. an external benefit
2. a pollution tax
3. a marketable pollution permits system
4. a command and control policy
The main aim of the London Congestion Charge introduced in February 2003 is to
1. reduce the demand for bus transport at peak times
2. shift congested traffic to other parts of London
3. increase the private cost of motoring in the zone at certain times
4. increase the level of congestion on the London Underground
If the production of output from the UK farming industry creates negative externalities:
1. social benefits are higher than private benefits
2. social costs are lower than private costs
3. social costs are higher than private costs
4. both social benefits and costs are higher than private benefits and costs
If the government imposes a pollution tax on a market where externalities are present
1. private costs will move closer to social costs
2. the supply curve will shift to the left
3. some of the tax will be shifted onto the consumer
4. all of the above
Should we insist and require that pollution be reduced to zero?
1. No because some pollution is beneficial
2. No because the marginal costs of reducing pollution may exceed the marginal benefits of lower pollution at some stage
3. No because reducing pollution to zero is politically impossible to achieve
4. Yes because all pollution is harmful
Which one of the following is unlikely to be classified as an environmental tax?
1. The Landfill Tax
2. The Climate Change Levy
3. Income Tax
4. The London Congestion Charge
A marketable pollution permit is
1. A permit that allows a firm to sell the right to pollute within its own market
2. A permit sold by one country that allows foreign firms to dump their waste without penalty in that country
3. A permit that allows the government to tax polluters as much as is possible
4. A permit firms buy that allows them to reduce the amount of pollution they generate
A decision by the government to increase the tax on cigarettes by 30% leads to a 5% fall in demand for cigarettes. It can be deduced from this information that
1. demand for cigarettes is price elastic
2. demand for cigarettes is price inelastic
3. demand for cigarettes is totally price inelastic
4. the supply of cigarettes is perfectly elastic
The main aim of the Landfill Tax is
1. to encourage households to buy less goods and services
2. to encourage local authorities to increase the percentage of household waste that is recycled
3. to increase the demand for waste incineration
4. to increase the profits of companies that operate landfill sites
Which one of the following is a cause of government failure when trying to deal with the effects of externalities
1. the pollution tax has a damaging effect on the distribution of income
2. producers who pollute pass on a tax to the consumer
3. the tax is set at the wrong level to achieve a social optimum
4. all of the above
A pollution permit is a
1. license issued to producers in non-market economies
2. government voucher allowing unlimited pollution
3. tax levied on firms creating pollution
4. means of creating a market in the right to create externalities

AS Economics: Externalities and Government Policy

Economics Multiple-choice Quiz