Question 1

Unexpected discoveries of mineral reserves will ordinarily cause the price of these minerals to increase.

Accepted Answer

Unexpected discoveries of mineral reserves usually lead to an increase in supply, which can cause the price to decrease due to excess supply.

Question 2

Even if demand for a resource grows over time,ever-rising prices of the resource that result from its growing scarcity still discourage consumption.

Accepted Answer

As the scarcity of a resource increases, its price will also increase (assuming demand remains constant or grows). This increase in price will discourage some consumers from consuming the resource, as they will seek out cheaper alternatives. Therefore, even if demand for the resource grows over time, the rising prices due to its growing scarcity can still discourage consumption.

Question 3

Price controls on resources generally lead to surpluses.

Accepted Answer

Price controls often lead to shortages or surpluses depending on the specific circumstances, and the characteristics of the market being affected. However, resource prices are generally set by supply and demand forces in the global market, and price controls in one country or region will not significantly affect the overall availability or price of a resource.

Question 4

Increased concern about environmental problems derive partly from
A)concerns about increasing economic output.
B)concerns about unemployment and inflation.
C)new awareness that the problems exist.
D)concerns about the quality of life.

Accepted Answer

The answer of Increased concern about environmental problems derive partly...

Question 5

Rising prices of resources leads to inefficient resource use by industry.

Accepted Answer

Rising prices of resources typically encourage industries to use resources more efficiently or to find alternatives, as higher costs incentivize reducing waste and improving productivity to maintain profitability.

Question 6

In a free market the quantity demanded will not exceed the quantity supplied of a resource,even if it is undergoing rapid depletion.

Accepted Answer

The answer of In a free market the quantity demanded...

Question 7

The British economist A.C.Pigou
A)wrote The Economics of Welfare in 1911.
B)offered an explanation of the market economy's poor environmental performance.
C)outlined an approach to environmental policy still in favor with economists today.
D)All of the above are correct.

Accepted Answer

A.C. Pigou wrote The Economics of Welfare in 1911, in which he introduced the concept of externalities and offered an explanation of the market economy's poor environmental performance. He also outlined an approach to environmental policy known as Pigouvian taxation, which is still favored by economists today as a way to correct market failures caused by negative externalities.

Question 8

Environmentalists,politicians,and economists have different perspectives on what constitutes appropriate environmental policy.Which of the following statements was probably made by an economist?
A)"We take the position that there are rights involved here, rights to be protected from threats to your health, regardless of the costs involved."
B)"Protecting the environment is so important that standards cannot be too high, and continuing improvements must be made regardless of cost."
C)"Pollution is a moral issue that cannot be reduced to dollars and cents."
D)"Clean air and water are things we can buy-if the price is right."

Accepted Answer

The statement "Clean air and water are things we can buy-if the price is right" reflects an economic perspective as it highlights that environmental quality is influenced by its price, and implies that it is possible to achieve environmental goals through market mechanisms such as pricing or taxation.

Question 9

Economic theory would lead us to suspect that deep sea oil reserves would be accessed before those located in the Middle East or on the U.S.mainland.

Accepted Answer

This statement is false. Economic theory would actually suggest that oil reserves located on land are cheaper and easier to access than those located deep under the sea. This is because the costs of exploration, drilling, and transportation are much higher for deep sea reserves. Therefore, it is more likely that the Middle East or U.S. mainland reserves would be accessed before deep sea reserves.

Question 10

Economists use a resource's price as an indicator of its relative scarcity.

Accepted Answer

Economists typically assume that resources with higher prices are relatively scarce, while resources with lower prices are abundant. This is because as a resource becomes scarcer, people are willing to pay more to obtain it, driving up its price.

Question 11

Identify the economist who first addressed the environmental problem in terms of externalities.
A)Joseph Schumpeter
B)Maynard Keynes
C)A.C. Pigou
D)J.B. Say

Accepted Answer

A.C. Pigou was the economist who first addressed the environmental problem in terms of externalities. In his 1920 book "The Economics of Welfare," he introduced the concept of externalities and argued that they could lead to market failures, including environmental degradation. He suggested that imposing a tax on activities that generate negative externalities, such as pollution, could help correct these market failures. This approach is now known as the Pigouvian tax.

Question 12

When a resource is being depleted and becomes scarce,the market's way of encouraging conservation is for the price of the resource to rise,without any government intervention.

Accepted Answer

When a resource becomes scarce and in high demand, the market responds by increasing the price of that resource. This serves as a signal to consumers to reduce their consumption and encourages producers to increase their supply, both of which can help conserve the resource. This happens without government intervention, as it is a natural market mechanism.

Question 13

Dwindling resources encourage the development of substitute products.

Accepted Answer

When resources become scarce or limited, it encourages companies and individuals to explore and invest in developing substitute products to meet their needs. This is a common phenomenon in industries such as energy where oil and gas reserves are depleting, leading to the rise of alternative energy sources like wind, solar, and geothermal.

Question 14

If a depletable resource is selling in a perfectly competitive market,its price will rise by greater and greater dollar amounts each year.

Accepted Answer

The answer of If a depletable resource is selling in...

Question 15

The worst and most difficult to extract resources are used first.

Accepted Answer

The opposite is true. The easiest and most accessible resources are typically extracted first, and as those become depleted, companies must resort to more difficult and expensive methods to extract remaining resources.

Question 16

One of the virtues of rising resource prices is they encourage innovation,especially the discovery of other more abundant resources.

Accepted Answer

Rising resource prices make it more profitable to develop alternative resources, which encourages innovation and the discovery of more abundant resources.

Question 17

One of the conclusions of A.C.Pigou was that
A)a system of mandatory controls is the only effective means to control pollution.
B)a system of charges can be an effective means to control pollution.
C)pollution will wither away if a socialist system is in place.
D)pollution cannot be adequately addressed in a price system.

Accepted Answer

Pigou's conclusion was that a system of charges (also known as Pigouvian taxes) could be an effective means to control pollution. By imposing taxes on industries based on the amount of pollution they produce, the costs of pollution are internalized and firms have an incentive to reduce their pollution levels. This allows for pollution reduction while still operating within a price system.

Question 18

Interest in environmental problems has intensified,perhaps because
A)for the first time in history in the 1970s people began to die from pollution-related diseases.
B)rising incomes have caused people to be more concerned with the quality of their lives.
C)the centrally planned economies are polluted.
D)All of the above are true.

Accepted Answer

The answer of Interest in environmental problems has intensified,perhaps because
A)for...

Question 19

The invention of new mining methods will affect price through the supply side.

Accepted Answer

The invention of new mining methods can increase the supply of a commodity, which can lead to a decrease in price due to the increased competition among suppliers. However, it can also lead to a decrease in production costs, which can allow suppliers to lower prices and still make a profit. Therefore, the invention of new mining methods can affect price through the supply side.

Question 20

Price controls would ordinarily be used to increase rather than decrease prices of depletable resources.

Accepted Answer

Price controls are usually used to decrease prices in order to make goods and services more affordable to consumers. However, in the case of depletable resources, such as oil or natural gas, governments may implement price controls to artificially raise prices and encourage conservation and efficient use of these finite resources.

Quiz 17: Externalities, the Environment, and Natural Resources