Question 1

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 2

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 3

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

Antitrust enforcement broke up a cartel among major suppliers of the resource, leading to increased competition and decreased prices. This factor was not accounted for in the economic theory's prediction.

Question 4

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

Accepted Answer

As a competitive economy uses its stocks of a depletable resource, the demand for the resource increases, causing its price to rise. As the resource becomes scarcer, its price will continue to rise, potentially resulting in a cycle of ever-increasing prices.

Question 5

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

The shift toward smaller, more fuel-efficient cars meant that the overall demand for oil by U.S. automakers decreased. This shift in demand caused the demand curve for oil to shift in, meaning that at any given price, the quantity of oil demanded by U.S. automakers was lower than before. It did not cause a shift in the supply curve of oil.

Question 6

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

Accepted Answer

The high prices of copper, lead, and zinc during this period stimulated exploration for new reserves, leading to an increase in reserves.

Question 7

Which of the following could be called a virtue of raising prices of depletable resources? (i) It would discourage consumption and waste.(ii) It would stimulate more efficient use of resources.(iii) It would encourage innovation and discovery of alternatives.

Accepted Answer

All three options are virtues of raising prices of depletable resources. By making resources more expensive, consumers will be discouraged from wasteful consumption, which promotes sustainability. Additionally, it will prompt innovators to discover alternatives to these resources, and encourage consumers to use resources more efficiently.

Question 8

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

Accepted Answer

Implementation of a price ceiling below its equilibrium price would reduce the consumption of an exhaustible natural resource as the price of the resource would be lower than the market price, leading to a decrease in demand and consumption. A decrease in monopoly control of the market for the resource might lead to lower prices, but the effect on consumption is uncertain. Government tax policies that give tax breaks to entrepreneurs who search for new reserves of the resource would encourage exploration and extraction, leading to an increase in consumption. Government macroeconomic policies that lower the interest rate on bonds might stimulate economic growth, but there is no direct link to the consumption of exhaustible natural resources.

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

Accepted Answer

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

Question 10

If one tracks the prices of critical metals, like lead, zing, and copper, one sees that

Accepted Answer

The prices of critical metals like lead, zinc, and copper have risen about as rapidly as the general rate of inflation. This means that while the prices have increased, they have not increased at a faster rate than other goods and services.

Question 11

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

Accepted Answer

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

Question 12

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

Accepted Answer

According to the law of supply and demand, as demand for a depletable resource increases and its supply decreases, the price of the resource will rise steadily. This is due to the scarcity of the resource and the competition among buyers who are willing to pay a higher price to secure their access to it.

Question 13

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

Accepted Answer

The supply curve of oil shifted inwards due to the OPEC embargo, as there was a decrease in the quantity of oil supplied to the United States. This led to an increase in oil prices and a reduction in the quantity of oil demanded, causing the demand curve to shift inwards as well.

Question 14

Economic theory posits that a resource that 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,

Accepted Answer

The study found that the prices of lead, zinc, and copper remained remarkably stable until about 2007, contrary to the economic theory prediction of a continuous rise in price.

Question 15

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 the Petroleum Exporting Countries) who sought to control the production and distribution of oil, leading to a reduction in supply and a corresponding rise in prices. This was not due to depletion of reserves or high growth rates. While oil prices did decrease by the 1980s, it was not fully reversed.

Question 16

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 17

Rising prices for a natural resource stimulate

Accepted Answer

When the price of a natural resource rises, it becomes more expensive to use, which creates an incentive to find substitutes for it. This incentivizes the development of new technologies, products or processes that either use less of the resource or replace it with a cheaper alternative, reducing demand for the original resource.

Question 18

Forecasts of an inevitable exhaustion of essential natural resources are "simply beside the point" because higher prices (i) reduce quantity demanded; (ii) stimulate supply; (iii) stimulate alternative technology.

Accepted Answer

The statement mentions three ways in which higher prices can address the issue of exhaustion of natural resources - by reducing quantity demanded (i), stimulating supply (ii), and stimulating alternative technology (iii). Therefore, all three options (i, ii, and iii) are correct, making option D the best choice.

Question 19

Briefly and concisely define the following terms.

Accepted Answer

The answer of Briefly and concisely define the following terms....

Question 20

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

Accepted Answer

If the price of a depleting resource does not rise as anticipated, it could be because new and more efficient methods of mining or refining the resource were developed. This would increase the supply of the resource and lower the price.

Quiz 16: The Economics of the Environment, and Natural Resources

Define the following terms and explain their importance to the study of economics. a.Greenhouse gases b.Externality c.Emissions permits d.Known reserves