Question 1

Rising prices for a natural resource stimulate

Accepted Answer

When prices for a natural resource rise, companies are encouraged to explore and invest in alternative resources that can be used as substitutes. This can lead to increased innovation and competition in the market, which may ultimately benefit consumers. Developing complements or externalities may also occur as a result of rising prices, but they are less common than the development of substitutes.

Question 2

Economic theory predicted that the price of a depletable resource would rise by 10 percent.In reality,the price fell by 5 percent.Which of the following events could explain this discrepancy?

Accepted Answer

The antitrust enforcement breaking up the cartel among major suppliers of the resource would increase competition and decrease the market power of these suppliers. This would lead to a decrease in the price of the depletable resource, even though economic theory predicted that the price would rise.

Question 3

The observed change in the reserves of copper,lead,and zinc between 1960 and 1990 was most likely caused by

Accepted Answer

High prices stimulated exploration for new reserves, leading to an increase in the observed reserves of copper, lead, and zinc between 1960 and 1990.

Question 4

The increase in world oil prices during the 1970s was

Accepted Answer

The increase in world oil prices during the 1970s was artificially created by OPEC (Organization of Petroleum Exporting Countries) who reduced their supply of oil to increase prices. This was known as the oil crisis of 1973. OPEC did this in response to the support of Israel by the United States and other Western countries during the Yom Kippur War. The world became heavily reliant on oil and this crisis led to widespread inflation and economic recession in many countries. The increase in oil prices was not the result of depletion of oil reserves or extremely high growth rates in industrialized countries. The increase was not fully reversed until the mid-1980s.

Question 5

Discuss the role of individuals and governments in committing environmental damage.

Accepted Answer

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Question 6

If one tracks the prices of critical metals,one sees that

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Question 7

If one adopts a pure free market approach to depletable resources,then one can expect the price of resources to

Accepted Answer

A pure free market approach means that the price of resources is determined solely by supply and demand. As resources become scarcer, demand for them will remain relatively constant while the supply dwindles, so the price will rise steadily.

Question 8

Forecasts of an inevitable exhaustion of essential natural resources are "simply beside the point" because higher prices

Accepted Answer

Higher prices for essential natural resources will reduce quantity demanded, which can lead to a decrease in the rate of depletion. Higher prices also stimulate supply by encouraging companies to invest in exploration and extraction of existing resources or search for new ones. Additionally, higher prices stimulate the development and use of alternative technology, which reduces dependence on the natural resource in question. Therefore, all of the options (A, B, and C) are true.

Question 9

In a free market for depletable natural resources,any shortage where there is an excess of quantity demanded over quantity supplied must be

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Question 10

What are the implications of the law of conservation of matter and energy for recycling and waste disposal?

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Question 11

Voluntarism often has proved to be weak and unreliable.Does it still have a place in controlling activities that damage the environment?

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Question 12

Detrimental externalities like pollution are a shortcoming of the market mechanism.Do they occur in free market economies alone? Explain with examples.

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Question 13

Which of the following could be called a virtue of raising prices of depletable resources?

Accepted Answer

A) Raising prices of depletable resources would make them more expensive, which would discourage consumption and waste as people would be less likely to use them frivolously or excessively.

B) Higher prices of depletable resources would incentivize consumers and producers to find more efficient ways of using and conserving those resources, as it would become more costly to waste or overuse them.

C) With higher prices on depletable resources, there would also be more economic incentive for innovation and the discovery of alternatives. Higher prices could prompt research and investment into finding new, renewable resources or products that use fewer depletable resources.

Therefore, all of the above are true.

Question 14

As a competitive economy uses its stocks of a depletable resource,

Accepted Answer

As the economy competes for a depletable resource, the demand for the resource will increase over time. This increase in demand will cause the price of the resource to rise. As the price of the resource rises, it becomes more profitable to extract the remaining reserves, and this increases the rate of depletion. Therefore, the resource price will rise by ever greater amounts each year.

Question 15

Explain why environmental damage would be classified as an externality.

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Question 16

Briefly and concisely define the following terms.
a.voluntarism
b.direct controls
c.depletable resource

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a.voluntarism
b.direct...

Question 17

An unexpected discovery of a new mineral deposit will cause the

Accepted Answer

An unexpected discovery of a new mineral deposit increases the availability of the mineral, which shifts the supply curve outward, indicating an increase in supply at every price level.

Question 18

Define the following terms and explain their importance to the study of economics.
a.greenhouse gases
b.externality
c.emissions permits
d.known reserves

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Question 19

The price of a depletable natural resource last year rose more than expected.The most likely explanation is that

Accepted Answer

When major suppliers of a depletable natural resource form a cartel, they can effectively control the supply of that resource on the market. By limiting supply, the cartel can cause prices to rise, especially if the demand remains constant or increases. This is a common strategy used by organizations like OPEC in the oil industry to influence oil prices globally. The other options (A, B, and D) would not typically result in a price rise more than expected; in fact, options A and B could potentially lead to lower prices, and D would cap prices, preventing them from rising.

Question 20

Following the sharp increases in oil prices in the United States caused by the OPEC oil embargo of 1973-1974,U.S.automakers started building smaller,more fuel-efficient cars.This development caused the

Accepted Answer

When automakers started building smaller, more fuel-efficient cars, the demand for oil decreased. This caused the demand curve for oil to shift inwards, as consumers required less oil. This led to a decrease in oil prices, as there was less demand for it.

Quiz 17: Externalities, the Environment, and Natural Resources