182. 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
DISC: Supply and demand
United States – BPROG: Reflective Thinking – BPROG: Analysis
Supply and demand
Actual Resource Prices in the Twentieth Century
183. 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.
DISC: The role of government
United States – BPROG: Reflective Thinking – BPROG: Analysis
The role of government
Actual Resource Prices in the Twentieth Century
184. 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.
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPRPOG: Analysis
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Actual Resource Prices in the Twentieth Century
185. If one tracks the prices of critical metals, one sees that
a.
b.
c.
d.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Actual Resource Prices in the Twentieth Century
186. 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.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Reflective Thinking – BPROG: Analysis
Markets, market failure, and ext – Markets, market failure, and externalities
187. 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.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Reflective Thinking – BPROG: Analysis
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Actual Resource Prices in the Twentieth Century
188. 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.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Actual Resource Prices in the Twentieth Century
189. 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.
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
Actual Resource Prices in the Twentieth Century
190. 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.
DISC: Oligopoly
United States – BPROG: Reflective Thinking – BPROG: Analysis
Actual Resource Prices in the Twentieth Century
191. 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.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Actual Resource Prices in the Twentieth Century
192. 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.
Easy
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Actual Resource Prices in the Twentieth Century
193. 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.
Difficult
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPRPOG: Analysis
Markets, market failure, and ext – Markets, market failure, and externalities
Actual Resource Prices in the Twentieth Century
194. 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.
DISC: Supply and demand
United States – BPROG: Reflective Thinking – BPROG: Analysis
Supply and demand
Actual Resource Prices in the Twentieth Century
195. 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.
DISC: Elasticity
United States – BPROG: Analytic
Actual Resource Prices in the Twentieth Century
196. 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.
DISC: Elasticity
United States – BPROG: Reflective Thinking – BPROG: Analysis
Actual Resource Prices in the Twentieth Century
197. 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.
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
Actual Resource Prices in the Twentieth Century
198. 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.
Moderate
DISC: Supply and demand
United States – BPROG: Reflective Thinking – BPROG: Analysis
Supply and demand
Actual Resource Prices in the Twentieth Century
Essay
199. Define the following terms and explain their importance to the study of economics.
a.
greenhouse gases
b.
externality
c.
emissions permits
d.
known reserves
Easy
United States – BPROG: Analytic
Review—Externalities: A Critical Shortcoming of the Market Mechanism
200. Briefly and concisely define the following terms.
a.
voluntarism
b.
direct controls
c.
depletable resource
voluntary recycling of solid wastes by consumers.
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
Basic Approaches to Environmental Policy
201. Explain why environmental damage would be classified as an externality.
Easy
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Review—Externalities: A Critical Shortcoming of the Market Mechanism
202. Detrimental externalities like pollution are a shortcoming of the market mechanism. Do they occur in free market
economies alone? Explain with examples.
Easy
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Review—Externalities: A Critical Shortcoming of the Market Mechanism
203. Discuss the role of individuals and governments in committing environmental damage.
204. What are the implications of the law of conservation of matter and energy for recycling and waste disposal?
205. Voluntarism often has proved to be weak and unreliable. Does it still have a place in controlling activities that
damage the environment?
206. What are the advantages of a tax system for pollution control?
207. Why do polluting firms overproduce? Use a completely and correctly labeled graph to illustrate your answer.
208. If a firm that emits a form of pollution is also a monopolist, is the firm more likely to be allocatively efficient?
Explain.
209. Describe how a pollution-control authority might use an emissions permits system to reduce pollution.
210. What has happened to resource prices in the twentieth century and what do they reveal about resource scarcity?
211. How does the price system cope with depletable resources?
212. Explain what a “cap and trade” program is and how it works. Does the U.S. have a cap and trade program? If so, is it
successful?
213. “One of the failings of a market system is the damage to the environment. Pollution would not exist with a centrally
planned economy.” Evaluate this statement.
214. Compare market price and quantity of steel to socially optimal price and quantity if steel producers ignore soot
emitted from their smokestacks. Use a graph to assist your explanation.
215. Explain why environmentally minded firms in a competitive industry will find it difficult to take environmental
action.
216. Why do most economists favor emissions taxes over direct controls as a pollution deterrent?
217. Explain some important situations where direct controls have a clear advantage over taxes.
218. Why is it misleading to argue that emissions permits are a “license to pollute”?
219. Will depletable resources such as oil, coal, and aluminum be exhausted if their prices are left to the market?
220. How do rising prices slow resource depletion?
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Economic Analysis: The Free Market and Pricing of Depletable Natural Resources
221. There is concern that CFCs, a chemical by-product of refrigeration, are destroying Earth’s protective ozone layer,
leaving us more vulnerable to cataracts and skin cancer. Suppose each air conditioner creates 10 pounds of CFCs. The
demand and supply of air conditioners follow:
Price (dollars)
400
350
300
250
200
Quantity demanded
10
12
14
16
18
Quantity supplied
18
16
14
12
10
What will be the free market price and quantity, and what will be the price and quantity if the government forces suppliers
to pay a $100 tax for each air conditioner produced?
equilibrium price is $350, and quantity is 12. Producers net $250.
United States – BPROG: Reflective Thinking – BPROG: Analysis
Understanding and applying econo – Understanding and applying economic models
Basic Approaches to Environmental Policy
222. Americans are creating an enormous amount of solid waste daily-over 4 pounds per person per day. How is the
United States coping with this extraordinary problem?
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Basic Approaches to Environmental Policy