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Checkpoint quiz · Environmental Economics

Environmental Economics: Checkpoint 1

Covers externalities, the tragedy of the commons, and carbon pricing tools.

Five questions on why markets misprice environmental costs, and the main tools used to correct it.

Question 1 of 5 A negative externality is:

A cost fully paid by the buyer and seller in a transaction A cost of a transaction that falls on a third party who wasn't part of it A tax on imported goods A benefit only the seller receives

Question 2 of 5 The gap between private cost and social cost exists because:

Markets always overprice goods Market prices typically reflect only private cost, not externalities Governments set all prices Social cost is always lower than private cost

Question 3 of 5 The 'tragedy of the commons' occurs when:

A single monopoly controls a resource Individually reasonable use of a shared, unowned resource collectively exhausts it A resource is overpriced by a government Property rights are too strictly enforced

Question 4 of 5 Research on real-world commons has shown that:

Only government ownership can prevent overuse Communities can also successfully self-manage shared resources through local rules Privatization is the only effective solution Commons problems cannot be solved

Question 5 of 5 The key structural difference between a carbon tax and cap-and-trade is:

A carbon tax fixes the price and lets quantity emitted adjust; cap-and-trade fixes the quantity and lets price adjust They are functionally identical policies Only cap-and-trade involves any cost to emitters A carbon tax only applies to individuals, not businesses

← Back to Carbon Pricing: Taxes and Cap-and-Trade Next lesson → The Economics of Renewable Energy

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