Question 1

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

Breaking up a cartel among major suppliers of the resource would increase competition and supply, leading to lower prices than what the economic theory predicted.

Question 2

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 3

If the price of a depleting resource does not rise as anticipated, it may be because
A)the government prohibited the methods to extract the resource.
B)new methods of mining or refining were developed.
C)a price floor was passed by law.
D)firms that distribute the resource cartelized.

Accepted Answer

If the price of a depleting resource does not rise as anticipated, it could be because of the development of new methods of mining or refining that make extraction more efficient or cost-effective, leading to increased supply and potentially lower prices. The other options (government prohibition, price floor, and cartelization) would all lead to higher prices, so they are not likely explanations for a failure of prices to rise as expected.

Question 4

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)the tendency to consume before the resource expires.

Accepted Answer

When the price of a natural resource increases, it becomes more expensive to use, leading consumers to seek out substitutes for the resource. This can lead to the development of new technologies and products that use alternative resources.

Question 5

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 6

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 countries stopping selling oil to the United States caused the supply of oil to the United States to decrease. This means that the supply curve of oil shifted in.

Question 7

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,
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 answer of Economic theory posits that a resource that...

Question 8

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 likely to have resulted in the observed change in reserves for copper, lead, and zinc. When prices are high, companies have more incentive to invest in exploration and development activities to expand their reserves.

Question 9

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.
A)i only.
B)ii only.
C)iii only.
D)i, ii, and iii.

Accepted Answer

The statement mentions all three ways in which higher prices can address the issue of an inevitable exhaustion of essential natural resources - by reducing the quantity demanded, stimulating supply, and stimulating alternative technology. Therefore, i, ii, and iii are all correct.

Question 10

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 11

If one tracks the prices of critical metals, like lead, zing, and copper, 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 have fallen, indicating that consumers have found other alternatives.
D)the prices have fluctuated too wildly to conclude anything.

Accepted Answer

Tracking the prices of critical metals shows that they have risen about as rapidly as the general rate of inflation, indicating that the prices have not fallen and consumers have not found other alternatives. The prices have also not fluctuated too wildly to draw conclusions.

Question 12

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....

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 would result in the price of resources rising steadily due to the increasing scarcity of the resource as it is depleted. As the resource becomes more scarce, the demand for it remains the same or may increase, leading to a rise in its price.

Question 14

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

Accepted Answer

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

Question 15

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 increase. This will cause the price of the resource to rise. As the stocks of the resource are depleted, it will become more difficult and expensive to extract the remaining resource, causing the price to rise even further. This trend will continue until either the price of the resource becomes so high that it is no longer economically viable to use it, or until an alternative resource is found. Therefore, the resource price will rise by ever greater amounts each year.

Question 16

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 artificially created by OPEC. OPEC, a group of oil-producing countries, collectively reduced their oil production and imposed an embargo on countries that supported Israel in the 1973 Yom Kippur War. This led to a shortage of oil supply and a significant increase in oil prices. The increase in prices was not due to a depletion of world reserves of oil or high growth rates in industrialized countries. While the prices did eventually decrease in the 1980s, they were not fully reversed by 1982.

Question 17

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 caused a decrease in the demand for oil from the U.S. automotive industry, leading to a shift in the demand curve for oil to the left (inward). This is because a decrease in demand for a good or service typically results in a shift inward of the demand curve.

Question 18

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 19

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

A price ceiling set below the equilibrium price will create a shortage, which will reduce consumption of the exhaustible natural resource. Choice A is incorrect because a decrease in monopoly control may increase consumption. Choice B is incorrect because tax breaks for entrepreneurs may encourage exploration, leading to increased consumption. Choice D is incorrect because lowering the interest rate on bonds is unrelated to consumption of an exhaustible natural resource.

Question 20

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.
A)i, ii, and iii
B)Only i
C)Only ii
D)Only iii

Accepted Answer

Raising prices of depletable resources would discourage excessive consumption and encourage more efficient use of resources. This, in turn, would lead to innovation and the discovery of alternatives that may help to conserve these resources. Therefore, all three options (i, ii, and iii) can be considered virtues of raising prices of depletable resources.

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

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?

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

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

Rising prices for a natural resource stimulate

An unexpected discovery of a new mineral deposit will cause the

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

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,

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 (i) reduce quantity demanded; (ii) stimulate supply; (iii) stimulate alternative technology.

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

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

Briefly and concisely define the following terms. A.Voluntarism b.Direct controls c. Depletable resource

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

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

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

The increase in world oil prices during the 1970s was

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

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

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.