Question 1

An unexpected discovery of a new mineral deposit will cause the
A)demand curve to shift outward.
B)demand curve to shift inward.
C)supply curve to shift outward.
D)supply curve to shift inward.

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 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?
A)Known reserves of the resource were depleted.
B)The interest rate rose by 15 percent.
C)Antitrust enforcement broke up a cartel among major suppliers of the resource.
D)The government imposed an effective price floor.

Accepted Answer

Antitrust enforcement breaking up a cartel among major suppliers of the resource could lead to increased competition and lower prices, thereby causing the price to fall instead of rise as predicted by economic theory.

Question 3

The increase in world oil prices during the 1970s was
A)the result of depletion of world reserves of oil.
B)artificially created by OPEC.
C)the result of extremely high growth rates in industrialized countries.
D)fully reversed by 1982.

Accepted Answer

The increase in world oil prices during the 1970s was mainly due to the decision of OPEC to cut oil supplies to the Western countries in retaliation for their support of Israel in the Yom Kippur War. This resulted in an artificial scarcity of oil and a sharp increase in prices.

Question 4

A government currently uses price controls to hold down the price of zinc, an exhaustible resource.If price controls are removed,
A)production of zinc will probably fall.
B)zinc mines with high marginal cost of production will probably stop producing.
C)consumers of zinc will probably want substitutes for zinc.
D)income will probably be redistributed from zinc producers to zinc consumers.

Accepted Answer

The answer of A government currently uses price controls to...

Question 5

In retaliation for U.S.support for Israel during the Arab-Israeli War, OPEC countries stopped selling oil to the United States.For the United States, this embargo caused the
A)demand curve for oil to shift out.
B)demand curve for oil to shift in.
C)supply curve of oil to shift out.
D)supply curve of oil to shift in.

Accepted Answer

The OPEC oil embargo was a supply shock, meaning that it reduced the availability of oil supplied to the United States. This caused the supply curve to shift inwards, resulting in higher oil prices and less oil being demanded by consumers.

Question 6

In a free market for depletable natural resources, any shortage where there is an excess of quantity demanded over quantity supplied must be
A)expected as a matter of course.
B)due to a price floor.
C)the result of discovery of new deposits of the resources.
D)artificial.

Accepted Answer

The answer of In a free market for depletable natural...

Question 7

Which of the following is most likely to reduce the consumption of an exhaustible natural resource?
A)a decrease in monopoly control of the market for the resource
B)government tax policies that give tax breaks to entrepreneurs who search for new reserves of the resource
C)implementation of a price ceiling for the resource below its equilibrium price
D)government macroeconomic policies that lower the interest rate on bonds

Accepted Answer

Implementing a price ceiling below the equilibrium price reduces the incentive for consumers to use the resource excessively. If the price is below the market price, demand will increase and supply will decrease, potentially leading to shortages. This encourages consumers to use the resource judiciously. A decrease in monopoly control or tax breaks for entrepreneurs may increase the supply of the resource, but it may not necessarily reduce consumption. Lower interest rates do not affect the consumption of exhaustible natural resources directly.

Question 8

If one tracks the prices of critical metals, one sees that
A)they have risen more slowly than the general rate of inflation.
B)they have risen about as rapidly as the general rate of inflation.
C)the prices indicate increasing scarcity of the metals.
D)the prices have fluctuated too wildly to conclude anything.

Accepted Answer

The answer of If one tracks the prices of critical...

Question 9

If the price of a depleting resource does not rise as anticipated, it may be because:
A)​new reserves of the resource were discovered.
B)​new methods of mining or refining were developed.
C)​price controls were passed by law.
D)​All of the above are correct.

Accepted Answer

All of the options listed can contribute to a situation where the price of a depleting resource does not rise as anticipated. The discovery of new reserves would increase the supply of the resource, which could potentially keep prices from rising. Similarly, new methods of mining or refining could make it easier or cheaper to extract the resource, also potentially leading to lower prices. Price controls passed by law would directly limit the ability of prices to rise.

Question 10

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
A)demand curve for oil to shift out.
B)demand curve for oil to shift in.
C)supply curve of oil to shift out.
D)supply curve of oil to shift in.

Accepted Answer

The shift towards smaller, more fuel-efficient cars resulted in decreased demand for oil, shifting the demand curve for oil inwards.

Question 11

The price of a depletable natural resource last year rose more than expected.The most likely explanation is that
A)interest rates fell.
B)an unexpected discovery of reserves was made.
C)the major suppliers formed a cartel.
D)price ceilings were established.

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 12

As a competitive economy uses its stocks of a depletable resource,
A)the resource price will fall by ever greater amounts each year.
B)the resource price will rise by ever greater amounts each year.
C)the use of the resource will increase at an increasing rate.
D)resource use will drop to zero.

Accepted Answer

As a competitive economy uses its stocks of a depletable resource, the demand for the resource will continue to increase, while the supply decreases. This will lead to a rise in resource price over time. As the resource becomes scarcer, it will become increasingly valuable, and this will result in the price rising by ever greater amounts each year. Therefore, option B is the correct choice.

Question 13

If one adopts a pure free market approach to depletable resources, then one can expect the price of resources to
A)rise steadily.
B)fall steadily.
C)fluctuate in a random-walk fashion.
D)remain unchanged.

Accepted Answer

A pure free market approach to depletable resources means that the price is solely determined by supply and demand. As the resources become scarcer, the demand will remain constant or increase, leading to a rise in price. Therefore, one can expect the price of resources to rise steadily.

Question 14

Economic theory posits that a resource which is finite and being depleted will rise in price continuously, and demand will be reduced.In fact, a recent study, graphing the price behavior of lead, zinc and copper found that until about 2007,
A)​prices rose steadily, as predicted.
B)​prices dropped precipitously.
C)​prices remained remarkably stable.
D)​prices were up and down with no discernible pattern.

Accepted Answer

The passage states that a recent study found that until about 2007 the price behavior of lead, zinc and copper remained remarkably stable. This contradicts the economic theory that prices of finite and depleted resources will rise continuously. Therefore, the best answer is C - prices remained remarkably stable.

Question 15

Rising prices for a natural resource stimulate
A)the development of complements for the resource.
B)the development of substitutes for the resource.
C)the development of externalities from the resource.
D)All of the above are correct.

Accepted Answer

When the price of a natural resource rises, it becomes more expensive for consumers to use that resource, so they will be incentivized to find cheaper alternatives (substitutes) instead. This creates an opportunity for companies to develop and market new substitutes. The other answer choices (A and C) are less directly related to rising resource prices.

Question 16

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

Accepted Answer

The answer of Briefly and concisely define the following terms.
a.voluntarism
b.direct...

Question 17

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

Accepted Answer

The answer of Define the following terms and explain their...

Question 18

The observed change in the reserves of copper, lead, and zinc between 1960 and 1990 was most likely caused by
A)low prices discouraging exploration for new reserves.
B)a slowdown in demand growth.
C)high prices that stimulated exploration.
D)the discovery of substitutes.

Accepted Answer

High prices that stimulated exploration are the most likely cause of the observed change in reserves of copper, lead, and zinc between 1960 and 1990. The high prices made it economically viable to explore and extract these minerals, leading to an increase in reserves.

Question 19

Forecasts of an inevitable exhaustion of essential natural resources are "simply beside the point" because higher prices
A)reduce quantity demanded.
B)stimulate supply.
C)stimulate alternative technology.
D)All of the above are true.

Accepted Answer

Higher prices of natural resources will reduce the quantity demanded, stimulate supply of alternative resources, and stimulate the development and adoption of alternative technologies. Therefore, all of the statements (A, B, and C) are true.

Question 20

Which of the following could be called a virtue of raising prices of depletable resources?
A)It would discourage consumption and waste.
B)It would stimulate more efficient use of resources.
C)It would encourage innovation and discovery of alternatives.
D)All of the above are true.

Accepted Answer

Raising prices of depletable resources would discourage consumption and waste, as it would become more expensive to use them. This would also stimulate more efficient use of resources, as individuals and companies seek to minimize their costs. Additionally, higher prices would encourage innovation and discovery of alternatives, as it would become more economically feasible to invest in developing alternative resources. Thus, all of the statements are true.

Quiz 16: Externalities the Environment and Natural Resources

An unexpected discovery of a new mineral deposit will cause the

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?

The increase in world oil prices during the 1970s was

A government currently uses price controls to hold down the price of zinc, an exhaustible resource.If price controls are removed,

In retaliation for U.S.support for Israel during the Arab-Israeli War, OPEC countries stopped selling oil to the United States.For the United States, this embargo caused the

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

Which of the following is most likely to reduce the consumption of an exhaustible natural resource?

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

If the price of a depleting resource does not rise as anticipated, it may be because:

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

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

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

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

Economic theory posits that a resource which is finite and being depleted will rise in price continuously, and demand will be reduced.In fact, a recent study, graphing the price behavior of lead, zinc and copper found that until about 2007,

Rising prices for a natural resource stimulate

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

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

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

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

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