Natural Resource Economics
Exam Solutions
Course Introduction
Natural Resource Economics examines the allocation, utilization, and management of natural resources from an economic perspective. The course explores concepts such as resource scarcity, property rights, and the valuation of renewable and non-renewable resources. Students learn analytical tools to assess policies designed to encourage efficient and sustainable resource use. Topics include optimal extraction rates, market failures, externalities, resource conservation, and the interplay between economic development and environmental limits. Through case studies and real-world examples, the course equips students to critically evaluate contemporary issues in resource use and environmental policy.
Recommended Textbook
Environmental Economics and Management Theory Policy and Applications 6th Edition by Scott
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21 Chapters
884 Verified Questions
884 Flashcards
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Chapter 1: The Role of Economics in Environmental Management
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42 Verified Questions
42 Flashcards
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Sample Questions
Q1) a. Give a specific example that shows clearly how the System of National Accounts endorsed by the United Nations fails to properly capture activity that harms the environment.
b. Now, suggest a way to quantitatively correct the flaw in the particular case that you describe in part (a).
Answer: Responses may include any of the examples cited in the Application on environmental accounting, such as the devaluation of any natural resource due to pollution, or the clearing of forests for industrial development, which are excluded from national income measures, or the health care costs linked to toxic exposure that improperly inflate GDP. Depending on the example, the correction may be to estimate the value of the lost resource and deduct it from GDP or to deduct the actual health care cost for toxic exposure from the GDP measure.
Q2) Proponents of an environmentally adjusted measure of national income believe that environmental pollution linked to production should be recorded as a loss in the system of national accounts (SNA).
A)True
B)False
Answer: True
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Page 3
Chapter 2: Modeling the Market Process: a Review of the Basics
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Sample Questions
Q1) Equilibrium price is the price level at which Q<sub>D</sub> equals Q<sub>S</sub>.
A)True
B)False
Answer: True
Q2) The demand price represents the consumer's willingness to pay for the good.
A)True
B)False
Answer: True
Q3) Allocative efficiency in a market means that resources are appropriated such that
A) the additional social benefits outweigh the additional social costs
B) the additional social benefits outweigh the additional private benefits
C) the marginal social benefits are equal to the marginal social costs
D) the marginal social benefits are greater than the marginal social costs
Answer: C
Q4) A change in price results in a shift in the demand curve.
A)True
B)False
Answer: False
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Chapter 3: Modeling Market Failure
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Sample Questions
Q1) 2 Which area represents the loss to the petroleum refineries as a result of the restoration of efficiency?
Answer: The loss to petroleum refiners as a result of the restoration of efficiency is represented by Area C.
Q2) A public good
A) possesses the characteristic of nonrivalry in consumption B) is one whose benefits cannot be shared C) is provided by the public sector
D) has nonexcludable benefits
E) both (a) and (d)
Answer: E
Q3) Based on the model, the competitive price level is
A) P<sub>C</sub> = $18
B) P<sub>C</sub> = $20
C) P<sub>C</sub> = $25
D) P<sub>C</sub> = $40
Answer: A
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Chapter 4: Conventional Solutions to Environmental
Problems: Command-And-Control Approach
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40 Flashcards
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Sample Questions
Q1) The cost savings associated with the cost-effective solution relative to a uniform standard equals
A) $300
B) $108
C) $10.8
D) $9.60
Q2) Hypothetically, suppose a recent study of hazardous waste abatement (A) arrives at the following national estimates for abating chemical solvents: MSB = 100 - 0.75A and MSC = 20 + 0.50A, where A is measured in millions of tons per year, and costs are measured in millions of dollars.
a. Based on this information, what would be the national standard for an allocatively efficient abatement?
b. Under what conditions would this level be efficient at the regional level?
c. If instead the government set the abatement standard at 50 million tons per year, would that standard be too lenient or too restrictive at the national level? Support your answer with specific values.
Q3) Standards are the fundamental basis of most environmental policies.
A)True
B)False
Page 6
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Chapter 5: Economic Solutions to Environmental Problems: the Market Approach
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Sample Questions
Q1) When comparing a permit trading system to the use of a pollution charge
A) a permit trading system requires more government intervention because the government must determine the permit price
B) a permit trading system is inflexible because the number of permits cannot be adjusted
C) a pollution charge generates revenue for the government on all units of pollution not abated
D) pollution charges might create pollution hot spots
Q2) To promote cleaner air, the federal government in the United States enacted tax incentives for purchasing new electric vehicles or clean-fuel vehicles. These were scheduled to be phased out over time.
a. Graphically illustrate the intended effect of this tax incentive, and explain the expected outcome of phasing it out. (Assume there is no production externality.)
b. An alternative approach is to raise taxes on gasoline and other fuels. What is the economic intuition of this policy?
Q3) A pollution charge follows the "polluter-pays principle."
A)True
B)False
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Chapter 6: Environmental Risk Analysis
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Sample Questions
Q1) According to the EPA, human health risk assessment includes all of the following steps EXCEPT
A) hazard identification
B) dose-response assessment
C) exposure assessment
D) risk characterization
E) analysis phase
Q2) Risk assessment refers to only the quantitative evaluation of risk.
A)True
B)False
Q3) Comparative risk analysis is
A) a risk assessment strategy
B) a risk management strategy
C) a risk characterization approach
D) none of the above
Q4) De minimis risk identifies the point at which risk is set to zero.
A)True
B)False
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Page 8
Chapter 7: Assessing Benefits for Environmental Decision Making
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Sample Questions
Q1) A disadvantage of the travel cost method is that it estimates only existence value and not user value.
A)True
B)False
Q2) Before the policy was put into effect, estimated consumer surplus (in thousands of dollars) was valued at
A) 2,100
B) 44,100
C) 90,000
D) 45,900
Q3) Installing an air purifier or a water filtration system is an example of a(n)
A) direct estimation method
B) ozone-reducing policy
C) physical linkage approach
D) averting action
Q4) In theory, the concept of incremental benefits refers to the change in MSB of environmental quality from a pre-policy level to a post-policy level.
A)True
B)False
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Chapter 8: Assessing Costs for Environmental Decision Making
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40 Flashcards
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Sample Questions
Q1) Suppose the marginal social cost (MSC) of abatement for particulate matter (PM) is MSC = 8 + 0.5A, where A is percent of PM removed, and MSC is in millions of dollars. Find the change in total social costs (TSC) of abatement if the abatement level increases from 12 percent to 20 percent as a result of new policy.
Q2) The value of reduced product variety due to an environmental policy initiative or regulation is an example of an implicit cost.
A)True
B)False
Q3) The spending needed to maintain the utility level of society to compensate for resources used to achieve a cleaner environment is referred to as explicit environmental costs.
A)True
B)False
Q4) Expenditures on research and development represent the majority of spending on pollution and control in the United States.
A)True
B)False
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Chapter 9: Benefit-Cost Analysis in Environmental Decision
Making
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37 Verified Questions
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Sample Questions
Q1) In the final phase of benefit-cost analysis, one of the steps that is generally conducted is
A) to compare time-adjusted benefits to zero
B) to compare time-adjusted costs to unity
C) to determine if PVB and PVC are inversely related
D) to determine if an option is feasible
Q2) The present value of $525 received one year from today, assuming an annual rate of return of 5 percent is
A) $551.25
B) $525
C) $500
D) none of the above
Q3) The present value of benefits (PVB) is equal to (b<sub>t</sub>/[1+r<sub>s</sub>]<sup>t</sup>), with b<sub>t</sub><sub> </sub>= B<sub>t</sub>/(1 + p)<sup>t</sup>.
A)True
B)False
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Page 11
Chapter 10: Defining Air Quality: the Standard-Setting Process
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Sample Questions
Q1) The NAAQS are established using benefit-cost analysis.
A)True
B)False
Q2) Title IV of the 1990 Clean Air Act Amendments uses tradeable allowances to control sulfur dioxide emissions.
A)True
B)False
Q3) One of the hallmarks of the 1990 Clean Air Act Amendments is its integration of market-based policy instruments, such as the use of tradeable allowances to control emissions.
A)True
B)False
Q4) In the United States, the air quality standards used to control criteria pollutants
A) identify the maximum allowable concentrations of each pollutant
B) are set to achieve an efficient abatement level using benefit-cost analysis
C) are known as the NESHAP
D) are achieved by all AQCRs in the nation
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Chapter 11: Improving Air Quality: Controlling Mobile
Sources
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37 Verified Questions
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Sample Questions
Q1) Under the new GHG emissions standards for mobile sources, light-duty vehicles will have to achieve an average emissions level of 250 grams of carbon dioxide (CO<sub>2</sub>) for model year 2016.
A)True
B)False
Q2) Controls on GHG emissions from mobile sources
A) have been in place in the United States since the Clean Air Act of 1970
B) were recently established by the EPA and the National Highway Traffic Safety Administration (NHTSA)
C) are implemented solely through CAFÉ standards issued by the EPA
D) apply solely to heavy-duty trucks and rail transport vehicles
Q3) According to the textbook application, China's demand for automobiles
A) is linked in part to the nation's rising income and economic prosperity
B) is limited because of the absence of automobile plants in China
C) has declined because of the migration of people from urban to rural areas
D) has grown slowly over the past several years
Q4) Under the Clean Air Act, the emissions controls on mobile sources were set using benefit-cost analysis.
A)True B)False
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Chapter 12: Improving Air Quality: Controlling Stationary Sources
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Sample Questions
Q1) Suppose the Clean Air Act calls for a rise in NO<sub>2</sub> abatement (A) from 50 to 60 percent and that the MSC (in millions) is MSC = 12 + 0.8A, where A is measured in percent. Then, the incremental cost of this policy change is
A) $8 million
B) $40 million
C) $560 million
D) $500 million
Q2) Major sources of SO<sub>2</sub> emissions are automobiles and other mobile sources.
A)True
B)False
Q3) Relative to mobile sources, stationary sources are bigger emitters of sulfur oxides.
A)True
B)False
Q4) Of the two major pollutants responsible for acid rain, sulfur dioxide (SO<sub>2</sub>) is the more significant.
A)True
B)False
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Chapter 13: Global Air Quality: Policies for Ozone Depletion and Climate Change
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) In response to the climate change issue, President Obama
A) pledged to reduce the nation's GHG emissions by 17 percent below 2005 levels by 2020
B) has vetoed all environmental bills that do not include a cap-and-trade program
C) implemented a national carbon tax effective in 2012
D) committed the United States to participating in the EU ETS, starting in 2012
Q2) From an economic standpoint, the most relevant tax approach to reducing carbon dioxide emissions is a
A) gasoline tax
B) BTU tax
C) carbon tax
D) all of the above
Q3) Title VI of the 1990 Clean Air Act Amendments specifically addressed the problem of tropospheric ozone.
A)True
B)False
Q4) The "greenhouse effect" is a natural phenomenon.
A)True
B)False
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Chapter 14: Defining Water Quality: the Standard-Setting Process
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43 Flashcards
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Sample Questions
Q1) U.S. policymakers classify highly diverse surface waters into groups, which include:
A) bays and estuaries
B) wetlands
C) aquifers
D) all of the above
E) (a) and (b) only
Q2) The technology-based effluent limitations
A) are not aligned with the nation's water quality objectives
B) are motivated by what is feasible instead of by benefit-cost analysis
C) are applied uniformly within designated industry groups
D) all of the above
E) (b) and (c) only
Q3) Water runoff from a major highway is an example of a point source.
A)True
B)False
Q4) Use designation of water quality standards is evaluated using a use-support status framework.
A)True
B)False
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Chapter 15: Improving Water Quality: Controlling Point and Nonpoint Sources
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Sample Questions
Q1) The technology-based effluent limitations are actually performance-based standards.
A)True
B)False
Q2) According to available data, most water bodies in the United States have met the zero discharge goal.
A)True
B)False
Q3) According to U.S. water quality control policy, tradeable effluent permits
A) can be used to control both point and nonpoint polluting sources
B) can achieve cost savings as long as polluters' MACs are unequal
C) are generally sold by low-cost abaters
D) all of the above
E) none of the above
Q4) When faced with a marginal effluent fee (MEF), each polluting source will
A) abate up to the point where its total abatement cost (TAC) equals the MEF
B) abate nothing and pay the MEF on all units of pollution released
C) clean up pollution as long as its marginal abatement cost is lower than the MEF
D) reduce its effluents to zero to avoid paying the effluent fee
Page 17
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Chapter 16: Protecting Safe Drinking Water
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Sample Questions
Q1) Each National Primary Drinking Water Regulation (NPDWR) includes a Maximum Contaminant Level Goal (MCLG), a Maximum Contaminant Level (MCL), and Best Available Technology (BAT).
A)True
B)False
Q2) A drinking water standard based on benefit-cost analysis would be set at the point where the TSB is maximized.
A)True
B)False
Q3) U.S. primary drinking water regulations are performance-based standards.
A)True
B)False
Q4) An increasing block pricing structure for water supplies
A) creates an economic incentive to conserve water usage
B) charges a higher price for lower levels of water consumption
C) does not reflect the underpinnings of benefit-cost analysis
D) ignores the marginal cost of water consumption
Q5) The first Safe Drinking Water Act (SDWA) was passed in the 1970s.
A)True
B)False
18
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Chapter 17: Managing Hazardous Solid Waste and Waste Sites
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Sample Questions
Q1) Use marginal analysis (i.e., marginal social benefit (MSB) and marginal social cost (MSC)) to graphically illustrate a Superfund site abatement decision that is solely risk-based relative to one that is based on the efficiency criterion. What do you observe? b. Repeat the exercise using total analysis (i.e., total social benefits (TSB) and total social costs (TSC)).
Q2) A type of hazardous substance is
A) an acid or base
B) a heavy metal like copper or mercury
C) synthetic organic chemicals, such as pesticides
D) all of the above
E) none of the above
Q3) The "cradle-to-grave" management system uses primarily market instruments to control and track hazardous wastes through the stages of the waste stream.
A)True
B)False
Q4) Types of hazardous substances include heavy metals, acids, and solvents.
A)True B)False
Page 19
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Chapter 18: Managing Municipal Solid Waste
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Sample Questions
Q1) In a deposit-refund system,
A) the refund component compensates the consumer for proper waste disposal or recycling activities
B) the deposit component should be set equal to the MSC of illegal waste production
C) the costs of monitoring and enforcement are higher than if a pollution charge were used
D) actual polluters are not penalized for decisions that pose a risk to the environment
Q2) In terms of nonhazardous waste, the federal government is responsible for A) every aspect of nonhazardous waste management
B) setting recycling rates for each state
C) establishing markets for recovered MSW
D) setting minimum criteria for sanitary landfills and other land disposal sites
Q3) MSW markets achieve efficiency at the point where MPC = MPB as long as there are no externalities.
A)True
B)False
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Chapter 19: Controlling Pesticides and Toxic Chemicals
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Sample Questions
Q1) Promoting the development of chemical technologies to achieve pollution prevention
A) is the objective of the Green Chemistry Program
B) defines the commitment of Extended Product Responsibility
C) is required under TSCA
D) all of the above
E) none of the above
Q2) The Food Quality Protection Act (FQPA) amended FIFRA and TSCA.
A)True
B)False
Q3) Chemical use is associated with a production externality.
A)True
B)False
Q4) The primary goal of the Pesticide Environmental Stewardship Program (PESP) is to regulate pesticide use.
A)True
B)False
Q5) Risk perception of chemical exposure does not always align with actual risk.
A)True
B)False
21
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Chapter 20: Sustainable Development: International Environmental Agreements
and International Trade
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Sample Questions
Q1) The Environmental Kuznets Curve
A) models a theorized relationship between environmental pollution and population
B) is positively sloped and linear
C) illustrates the relationship between economic growth and environmental degradation
D) graphs as a U-shaped curve
Q2) The shape of the Environmental Kuznets Curve reflects the theory that advanced levels of industrial development are linked to higher levels of pollution.
A)True
B)False
Q3) Since the NAFTA was reached in 1992, trade among Canada, Mexico, and the United States has risen, but exports to the United States have declined.
A)True
B)False
Q4) Protectionists support the use of trade barriers, such as tariffs and quotas.
A)True
B)False
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Chapter 21: Sustainable Approaches: Industrial Ecology and
Pollution Prevention
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Sample Questions
Q1) Pollution prevention
A) has nothing in common with industrial ecology
B) emphasizes the household sector
C) suggests source reduction and toxic chemical use substitution as preventive goals for industry
D) none of the above
Q2) A systems approach to the flow of materials and energy between industrial processes and the environment is known as a life cycle assessment.
A)True
B)False
Q3) Extended product responsibility (EPR) places all the onus of product stewardship on the producer.
A)True
B)False
Q4) Environmental technology transfers can involve dark green or light green technologies.
A)True
B)False
Page 23
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