Question 1

Under perfect competition, the price of a depletable resource whose cost of extraction is not changing must rise at

Accepted Answer

A) the same rate as the increase in GDP. 
B) the same rate as the increase in consumer prices. 
C) the same rate as the rate of interest. 
D) a rate higher than the increase in the rate of interest. 
A) the same rate as the increase in GDP. 
B) the same rate as the increase in consumer prices. 
C) the same rate as the rate of interest. 
D) a rate higher than the increase in the rate of interest.

Question 2

In the last three decades, air quality in American cities has improved.

Accepted Answer

A) True 
 B)False

Question 3

If timber prices are rising slower than the rate of interest then

Accepted Answer

A) investors should harvest timber instead of buying bonds. 
B) investors should buy bonds instead of harvesting timber. 
C) timber prices should increase. 
D) bond prices should decrease. 
A) investors should harvest timber instead of buying bonds. 
B) investors should buy bonds instead of harvesting timber. 
C) timber prices should increase. 
D) bond prices should decrease.

Question 4

Rising prices help control the process of resource depletion by

Accepted Answer

A) encouraging consumption and waste. 
B) stimulating more efficient use of the depletable resource. 
C) disincentivizing resource-saving innovation. 
D) stimulating resource imports. 
A) encouraging consumption and waste. 
B) stimulating more efficient use of the depletable resource. 
C) disincentivizing resource-saving innovation. 
D) stimulating resource imports.

Question 5

In practice, taxes on emissions of pollutants have been found to

Accepted Answer

A) be ineffective in encouraging firms to pollute less. 
B) significantly reduce pollution by taxed firms. 
C) be less reliable in reducing pollution than direct controls on pollution. 
D) cause failures of the pricing system. 
A) be ineffective in encouraging firms to pollute less. 
B) significantly reduce pollution by taxed firms. 
C) be less reliable in reducing pollution than direct controls on pollution. 
D) cause failures of the pricing system.

Question 6

Contrary to most thinking, governments play ____ in causing pollution.

Accepted Answer

A) almost no role 
B) a large but decreasing role 
C) a major role 
D) a reconstructive role 
A) almost no role 
B) a large but decreasing role 
C) a major role 
D) a reconstructive role

Question 7

Externalities can create a threat to environmental quality.

Accepted Answer

A) True 
 B)False

Question 8

Water quality in the United States has ____ in the past 25 years.

Accepted Answer

A) improved 
B) worsened 
C) remained unchanged 
D) improved slightly before a recent deterioration 
A) improved 
B) worsened 
C) remained unchanged 
D) improved slightly before a recent deterioration

Question 9

Which of the following would not lead to more conservation?

Accepted Answer

A) Higher prices for a resource 
B) Increased interest rates on bonds 
C) Public awareness of increasing scarcity 
D) Higher taxes on goods produced using the resource 
A) Higher prices for a resource 
B) Increased interest rates on bonds 
C) Public awareness of increasing scarcity 
D) Higher taxes on goods produced using the resource

Question 10

Some politicians rally against using the market to reduce pollution because

Accepted Answer

A) pollution charges and tradable permits allow firms to pollute as long as they can pay for it. 
B) polluting firms do not care about the environment, so something must be done. 
C) government-run industries have been better at controlling their pollution costs when compared to privately run firms 
D) pollution charges and tradable permits do not penalize polluting firms. 
A) pollution charges and tradable permits allow firms to pollute as long as they can pay for it. 
B) polluting firms do not care about the environment, so something must be done. 
C) government-run industries have been better at controlling their pollution costs when compared to privately run firms 
D) pollution charges and tradable permits do not penalize polluting firms.

Question 11

"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.

Accepted Answer

Market systems fail to include external

Question 12

Which of the following observations is true?

Accepted Answer

A) Environmental damage can be reduced to zero. 
B) Pollution results from a price mechanism malfunction. 
C) Charging those who emit pollution is not a way of dealing with pollution problems. 
D) Public interest requires pollution be maintained at its free-market level. 
A) Environmental damage can be reduced to zero. 
B) Pollution results from a price mechanism malfunction. 
C) Charging those who emit pollution is not a way of dealing with pollution problems. 
D) Public interest requires pollution be maintained at its free-market level.

Question 13

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

Accepted Answer

A) rise steadily. 
B) fall steadily. 
C) fluctuate in a random-walk fashion. 
D) remain unchanged. 
A) rise steadily. 
B) fall steadily. 
C) fluctuate in a random-walk fashion. 
D) remain unchanged.

Question 14

The increase in world oil prices during the 1970s was

Accepted Answer

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. 
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.

Question 15

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

Accepted Answer

Private individuals and government are m

Question 16

Basic supply and demand analysis can be used to explain how externalities lead to environmental problems.

Accepted Answer

A) True 
 B)False

Question 17

Pollution problems

Accepted Answer

A) have existed for many centuries. 
B) are attributable to modern industrialization. 
C) can be blamed on the profit system. 
D) have worsened in every respect in the past 40 years. 
A) have existed for many centuries. 
B) are attributable to modern industrialization. 
C) can be blamed on the profit system. 
D) have worsened in every respect in the past 40 years.

Question 18

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

A) True 
 B)False

Question 19

If a depletable resource is selling in a perfectly competitive market, its expected price will continue to fall over time. This makes it unprofitable for firms to seek out the resource and bring it to market.

Accepted Answer

A) True 
 B)False

Question 20

According to economic theory, under perfect competition, the price of a depletable resource

Accepted Answer

A) becomes  an inaccurate signal of scarcity. 
B) may fall as firms will develop substitutes. 
C) will be too volatile to let markets adjust. 
D) will increase as firms develop new innovations to extract the resource. 
A) becomes  an inaccurate signal of scarcity. 
B) may fall as firms will develop substitutes. 
C) will be too volatile to let markets adjust. 
D) will increase as firms develop new innovations to extract the resource.

Exam 16: Externalities, Externaliteis, the Environment, and Natural Resources

Under perfect competition, the price of a depletable resource whose cost of extraction is not changing must rise at

In the last three decades, air quality in American cities has improved.

If timber prices are rising slower than the rate of interest then

Rising prices help control the process of resource depletion by

In practice, taxes on emissions of pollutants have been found to

Contrary to most thinking, governments play ____ in causing pollution.

Externalities can create a threat to environmental quality.

Water quality in the United States has ____ in the past 25 years.

Which of the following would not lead to more conservation?

Some politicians rally against using the market to reduce pollution because

"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.

Which of the following observations is true?

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

The increase in world oil prices during the 1970s was

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

Basic supply and demand analysis can be used to explain how externalities lead to environmental problems.

Pollution problems

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.

If a depletable resource is selling in a perfectly competitive market, its expected price will continue to fall over time. This makes it unprofitable for firms to seek out the resource and bring it to market.

According to economic theory, under perfect competition, the price of a depletable resource

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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