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Practice mode Natural Resources and the Environment Toward Sustainable Development

When a government taxes polluters or adds a surcharge to pesticide use, what is it doing?

Correct answer C. Internalization of negative spillover effects

Explanation

Such taxes make producers pay for the external damage they cause, so the social cost of pollution is built into their private costs, which is called internalising a negative spillover.

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Question 02 Natural Resources and the Environment Toward Sustainable Development

Consider these possible effects of growth in the booming export sector: I. It reduces the price of foreign exchange. II. It slows other sectors’ growth by reducing incentives to export other goods. III. It reduces incentives to substitute domestic goods for imports. IV. It raises factor and input prices for non-booming sectors. Which of them does Michael Roemer’s three-sector model identify?

Correct answer D. I, II, III and IV

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Question 03 Natural Resources and the Environment Toward Sustainable Development

Coase’s theorem states that, if property rights are clearly defined and legally enforceable and transaction costs are not prohibitive, what will happen?

Correct answer D. Participants will organize their transactions

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