The exchange rate system that best characterizes the present international monetary arrangement used by industrialized countries is ?

A. Freely fluctuating exchange rates
B. Adjustable pegged exchange rates
C. Managed floating exchange rates
D. Pegged or fixed exchange rates

Which exchange rate mechanism calls for frequent redefining of the par value by small amounts to remove a payments disequilibrium ?

A. Dual exchange rate
B. Adjustable pegged exchange rates
C. Managed floating exchange rates
D. Crawling pegged exchange rates

Under adjustable pegged exchange rates, if the rate of inflation in the United States exceeds the rate of inflation of its trading partners ?

A. U.s exports tend to rise, and imports tend to fall
B. U.s imports tend to rise, and exports tend to fall
C. U.s foreign exchange reserves tend to rise
D. U.s foreign exchange reserves remain constant

Suppose an industry emits a negative externality such a pollution and the possible methods to internalize the externality are command-and-control policies, pigovian taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency ease of implementation and the incentive for the industry to further reduce pollution in the future, they would probably rank them in the following order (from most favored to least favored) ?

A. Pigouvian taxes, command-and-control policies, tradable pollution permits.
B. Tradable pollution permits, pigouvian taxes, command-and-control policies
C. Tradable pollution permits command-and-control policies, pigovian taxes.
D. Command-and-control policies, tradable pollution permits, pigovian taxes.

A negative externality generates ?

A. A social cost curve that is below the supply curve (private cost curve) for a good
B. None of these answers
C. A social cost curve that is below the supply curve (private cost curve) for a good
D. A social value curve that is above the demand curve (private value curve) for a good

A negative externality (that has not been internalized) causes the ?

A. Optimal quantity to exceed the equilibrium quantity.
B. Equilibrium quantity to be either above or below the optimal quantity
C. Equilibrium quantity to equal the optimal quantity
D. Equilibrium quantity to exceed the optimal quantity

To internalize a negative externality an appropriate public policy response would be to ?

A. Have the government take over the production of the good causing the externality
B. Ban the production of all goods creating negative externalities
C. Tax the good
D. Subsidize the good

When an individual buys a car in a congested urban area, it generates ?

A. A positive externality
B. A technology spillover
C. An efficient market outcome.
D. A negative externality

Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality ?

A. Costs incurred due to lawyers’ fees
B. Costs incurred to reduce the pollution
C. Costs incurred to enforce the agreement
D. Costs incurred due to a large number of parties affected by the externality

Roberto and Thomas live in a university hall of residence. Reberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs ?

A. Thomas will pay roberto between €100 and €150 and roberto will continue to play loud music
B. Roberto will pay thomas €150 and roberto will continue to play loud music
C. Thomas will pay roberto between €100 and €150 and roberto will stop playing loud music
D. Roberto will pay thomas €100 and roberto will stop playing loud music