1. Although the concept of sustainability is appealing, it is subject to two principal issues, ________ and ________.a. the lack of private initiatives; high budget deficitsb. how to increase the current employment rate; the challenges of attracting foreign investmentsc. how to think about population growth; the difficulty of predicting future technological progress and innovationd. the slow growth of the renewable energy industry; the difficulty in curbing emissions of greenhouse gases in developing countries2. ________ take(s) into account the benefits and costs of attaining environmental objectives and achieve those objectives by aligning the social and private costs of pollution and its abatement.a. Life-expectancy approachb. Supply-chain approachc. Command-and-control regulationsd. Incentive approaches3. Which of the following is a distinctive trait of incentive approaches?a. Incentive approaches impose a cost on pollution-causing activities, leaving it to individual polluters to decide how best to respond.b. Incentive approaches attain social efficiency by requiring polluters to externalize the social costs of pollution externalities.c. Incentive approaches does not take into account the benefits and costs of attaining environmental objectives.d. Incentive approaches centralize pollution-control decisions.4. Which of the following is true of the Coase theorem?a. It pertains to distributive objectives and social justice.b. It addresses the private attainment of social efficiency and the conditions for its attainment.c. It implies that when bargaining between the parties to an externality is possible, social efficiency cannot be achieved.d. It underrates the role of government in assigning entitlements to private parties.Unit 4 Examination154BAM 406 Business and Society5. Due to the ________, automobile emissions are controlled through government regulation.a. exorbitant costs associated with private bargainingb. unwillingness of businesses to curb air pollutionc. low negative externalities associated with air pollutiond. general disagreement on the impacts of automobile emissions on the environment6. Cap-and-trade systems are also called ________.a. market systemsb. governmental systemsc. life-expectancy systemsd. tradable permits systems7. The control of an externality in a tradable permits system has three components. The first component ________.a. is allowing parties to respond to incentives by choosing the most efficient means of abatementb. is providing incentives for abatement by internalizing the cost of the harm done by the pollutionc. involves reflecting in the prices of goods and services, the costs of abatement and the social costs of the harm from the remaining pollutiond. is allowing states to decide how best to decrease dangerous air pollution in the most cost effective manner8. The Clean Air Act Amendments of 1990 addressed efficiency through a tradable permits system and the distributive consequences were addressed through a number of special provisions called ________.a. permitsb. allowancesc. incentivesd. credits9. Why were the loan guarantee and cash option awarded to wind power producers jeopardized?a. State public utility regulatory agencies were barred by law from determining wind energy prices.b. The huge federal budget deficit required measures to reduce expenditure.c. State public utility regulatory agencies gave a negligible premium for wind power.d. The price of natural gas fell considerably.Unit 4 Examination155BAM 406 Business and Society10. Critics of the American Recovery and Reinvestment Act were of the opinion that ________.a. the government provided companies with low-cost loans from government supported banksb. the Department of Energy did not administer the loan guaranties based on applications by companiesc. the subsidies offered by the government were fairly inadequated. the government was trying to pick winners rather than allowing the market to determine the winners11. Which of the following is an economic advantage of the subsidization of renewable power?a. Subsidization decreases dependence on imported fuels.b. Subsidization renders the adverse effects of traditional energy sources harmless.c. Subsidies for renewable power plants do not affect states with budget deficits.d. Subsidies for renewable power plants increase the tax revenue of the country substantially.12. Supply-side subsidies include ________.a. tax credits for households to install solar panels on rooftopsb. tax credits for businesses to purchase electric carsc. high feed-in tariffs for power producersd. grants for households to purchase electric cars13. China took the lead in the production of solar panels primarily because ________. a. labor costs in China were very low relative to that in Europe and the United States b. the domestic demand for solar panels fell sharply c. the price of pure silicon rose dramatically as supply caught up with demand d. demand-side subsidization was not implemented in the United States14. In ________, or judge-made law, the decisions made by judges serve as precedents for future cases, and the set of precedents establishes a body of law.a. civil lawb. common lawc. statutory lawd. canon lawUnit 4 Examination156BAM 406 Business and Society15. ________ damages are based on the opportunity cost of the next best alternative. a. Consequential b. Reliance c. Liquidated d. Primary16. Court awards of damages take place ex post, and anticipation of those awards provides ex ante incentives to fulfill promises, while leaving the flexibility to breach contracts when it is efficient to do so. The parties to a contract may also write into the contract contingencies in the event of breach. This liquidated damages approach is ex ante and is based on the principle that ________.a. damages are intended as penalties for particular actionsb. damages should not be limited to compensation for harmc. more complete contracts can be more efficientd. the misuse of a product should be anticipated in advance17. The principal and most comprehensive source of institutional guidance on safety is the law of ________.a. contractsb. warrantiesc. propertyd. torts18. When an entitlement is protected by ________, a person may infringe the entitlement but must compensate its holder for the objectively assessed harm resulting from that infringement.a. a property ruleb. a liability rulec. a normd. canon law19. The law pertaining to product safety developed from ________, which focus on economic well-being.a. the laws of contracts and warrantiesb. the laws of property and entitlementsc. the statute of limitationsd. eminent domainUnit 4 Examination157BAM 406 Business and Society20. ________ is/are made in writing by the producer and, as part of the sales agreement, represent(s) obligations binding on the producer.a. Privity of contractb. Implicit guaranteesc. Express warrantiesd. Writs of assistance21. In most jurisdictions, products liability cases are covered by a ________, which is often 4 years.a. statute of limitationsb. statute of autonomyc. statute of compensationd. statute of frauds22. One of the reform measures proposed by the American Tort Reform Association is to have punitive damage awards paid to the ________.a. plaintiffb. defendantc. publicd. government23. The distributive objection to products liability is that ________.a. it is inequitable to assess damages to firms when there was nothing they could have done to prevent the injuryb. a reduction in the liability of retailers is likely to have negative consequences for businessesc. the awards in many cases are too large and seem to provide a prize, as in a lottery, rather than providing compensation for actual lossesd. the awards in cases decided on the basis of fault and negligence are mostly inadequate24. Which of the following is a demerit of the liability system?a. The liability system is costly to operate.b. Punitive damages awards are largely governed by strict constitutional guidelines.c. The insurance system prohibits firms to insure against the risks of damage awards.d. The standard of strict liability assigns too much of the cost of injuries to consumers and too little to firms, distorting the incentives for care.Unit 4 Examination158BAM 406 Business and Society25. From the perspective of producers, damage awards ________.a. facilitates the estimation of the ex post consequences of the producers’ ex ante decisionsb. are difficult to predictc. act as prime deterrents to insurance companies that disallow producers to insure against that riskd. are highly predictable
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