Natural Resource Economics
Mock Exam
Course Introduction
Natural Resource Economics explores the economic principles and analytical tools used to understand the allocation, utilization, and conservation of natural resources. The course examines both renewable and non-renewable resources, addressing issues such as market failure, externalities, property rights, and sustainable development. Students learn to evaluate policies and strategies for managing resources like water, energy, fisheries, forests, and minerals, with a focus on balancing economic growth with environmental preservation. The course also considers global challenges such as resource scarcity, climate change, and the economic implications of resource depletion.
Recommended Textbook
Environmental Economics and Management Theory Policy and Applications 6th Edition by Scott
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884 Verified Questions
884 Flashcards
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Page 2
Chapter 1: The Role of Economics in Environmental Management
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42 Verified Questions
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Sample Questions
Q1) Runoff from urban streets is an example of nonpoint source pollution.
A)True
B)False
Answer: True
Q2) Environmental economics
A) is concerned mainly with the residual flow from economic activity back to nature
B) focuses on the flow of resources from nature to economic activity
C) recognizes that the flow of residuals back to nature is preventable D) none of the above
Answer: A
Q3) Identify and briefly explain two economic incentives that would encourage firms to research and implement "design for recycling" programs.
Answer: Answers may include subsidies for researching such issues as identifying recyclable materials or devising better methods for sorting plastics, or federal grants for appropriate capital investment in recycling or sorting equipment, or tax deductions for designated expenditures on dismantling, recovery, recycling, or sorting.
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3
Chapter 2: Modeling the Market Process: a Review of the Basics
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Sample Questions
Q1) If the market for a good or service is competitive,
A) there are many independent buyers and sellers
B) buyers and sellers have no control over price
C) there are no entry barriers
D) all of the above
Answer: D
Q2) Consumer surplus is the net gain to the firm measured as the excess of price over the marginal cost of production summed over all units sold.
A)True
B)False
Answer: False
Q3) Equilibrium price is the price level at which Q<sub>D</sub> equals Q<sub>S</sub>.
A)True
B)False
Answer: True
Q4) In perfect competition, the firm faces a perfectly inelastic demand.
A)True
B)False
Answer: False
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Chapter 3: Modeling Market Failure
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Sample Questions
Q1) In the presence of a negative externality
A) there is an overallocation of resources to production
B) the competitive equilibrium will not achieve an allocatively efficient solution
C) MSC exceeds MSB at the competitive output level
D) all of the above
E) (a) and (b) only
Answer: D
Q2) Which area represents the net gain to society? Should the reduction in output from Q<sub>C</sub> to Q<sub>E</sub> take place? Why or why not?
Answer: Area D represents the net gain to society. Yes, the reduction should take place to achieve an efficient allocation of resources. This improvement is evidenced by the fact that the net gain is positive.
Q3) According to the textbook application, CD packaging is a negative production externality.
A)True
B)False
Answer: False
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Chapter 4: Conventional Solutions to Environmental
Problems: Command-And-Control Approach
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Sample Questions
Q1) Among the reasons that may explain why abatement standards are not set efficiently is imperfect information.
A)True
B)False
Q2) If the MACs for firm 1 and 2 are: MAC<sub>1</sub> = 0.4A<sub>1</sub> and MAC<sub>2</sub> = 0.8A<sub>2</sub>, respectively, and the combined abatement standard is 15 units, then the cost-effective abatement levels are 10 units for firm 1 and 5 units for firm 2.
A)True
B)False
Q3) The command-and-control approach to environmental policy uses rules, emissions limits, and various incentive-based policy instruments.
A)True
B)False
Q4) By definition, the marginal abatement cost (MAC) curve shows the change in costs associated with higher levels of abatement, using the most widely available technology.
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) A payment or tax concession aimed at lowering the cost of abating is called a pollution charge.
A)True
B)False
Q2) An emission charge
A) takes advantage of firms' natural profit incentive
B) cannot achieve a least-cost solution
C) offers no revenue stream to governments
D) has no effect on product pricing
Q3) Of all the market-based policy instruments used to combat environmental damage, the pollution charge is the most commonly used worldwide.
A)True
B)False
Q4) If production of a good generates an environmental negative externality, the effect of that externality is captured by the MEC of production.
A)True
B)False
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Chapter 6: Environmental Risk Analysis
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51 Verified Questions
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Sample Questions
Q1) Risk that is deliberately assumed is considered involuntary risk.
A)True
B)False
Q2) Suppose you are part of an economic analysis team charged with recommending a policy response to pesticide risks. Your team decides to use risk-benefit analysis as its risk management strategy.
a. On the risk side of the analysis, your team reviews the following data from the risk assessment process. Interpret each of these quantitative findings about pesticide risk, by stating precisely what the numerical value(s) mean or imply in each case. Be specific.
(i) Pesticide W: Reference Dose (RfD) = 0.005
(ii) Pesticide X: threshold level of 0 for infants and children
(iii) Pesticide Y: carcinogenic risk of 0.0075 percent
(iv) Pesticide Z: a dose (D)-response (R) function modeled as R = 0 for all D < 0.6, R =0.3 + 0.5D for all D \(\ge\) 0.6.
b. On the benefit side of the analysis, briefly describe two distinct benefits to society that are relevant to a risk-benefit analysis of pesticides.
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Page 8
Chapter 7: Assessing Benefits for Environmental Decision Making
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Sample Questions
Q1) Vicarious consumption refers to the notion that
A) individuals have a sense of obligation to preserve the environment for future generations
B) people gain utility knowing that others receive gains from an environmental good C) individuals gain from directly consuming the services generated by an environmental resource
D) natural resources have intrinsic value
E) none of the above
Q2) Increased fish populations linked to water pollution policy would be a type of secondary environmental benefit.
A)True
B)False
Q3) The contingent valuation method is so called because it is contingent upon the hypothetical market that serves as the context for the survey.
A)True
B)False
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Chapter 8: Assessing Costs for Environmental Decision Making
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Sample Questions
Q1) Marginal social cost is equivalent to the sum of the market-level marginal abatement costs and the government's marginal cost of enforcement.
A)True
B)False
Q2) The accounting equivalent of variable costs is capital costs.
A)True
B)False
Q3) Newly proposed controls on GHG emissions from motor vehicles are expected to elevate automobile prices.
A)True
B)False
Q4) Implicit costs refer to
A) out-of-pocket expenses
B) all readily identified expenditures
C) incremental costs of policy
D) none of the above
Q5) Fixed costs are controllable in the short run but not the long run.
A)True
B)False
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Chapter 9: Benefit-Cost Analysis in Environmental Decision Making
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Sample Questions
Q1) In a benefit-cost analysis, the determination of feasibility A) can be made by finding out if PVB/PVC is greater than unity B) is not critical and therefore is an optional step C) can be accomplished by finding out if PVNB is greater than zero D) all of the above E) (a) and (c) only
Q2) The discount rate used for public policy decision making is called the social discount rate.
A)True
B)False
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
Q4) If the nominal value of a benefit in 2011 is $1,500, its real value in 2012, assuming a 3 percent inflation rate, is $1,545.
A)True
B)False
Page 11
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Chapter 10: Defining Air Quality: the Standard-Setting Process
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48 Verified Questions
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Sample Questions
Q1) Natural pollutants
A) are those contaminants that are linked to human activity
B) include such contaminants as lead and carbon monoxide
C) are the same as anthropogenic pollutants
D) are those arising from nonartificial processes in nature
Q2) All of the following are examples of anthropogenic pollutants EXCEPT
A) lead
B) carbon monoxide
C) pollen
D) sulfur dioxide
Q3) Portney's research of the 1990 Clean Air Act Amendments (CAAA) finds that MSC exceeds MSB. Based on this finding, one can conclude that
A) the CAAA are allocatively efficient
B) TSC exceed TSB
C) these amendments are inefficient but cost-effective
D) the CAAA over-regulate society
Q4) Contaminants such as pollen and salt spray are known as anthropogenic pollutants.
A)True
B)False
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Chapter 11: Improving Air Quality: Controlling Mobile
Sources
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Sample Questions
Q1) Title II of the Clean Air Act Amendments of 1990 strengthened regulations on motor vehicle emissions and fuels.
A)True
B)False
Q2) Plug-in hybrids and hybrid vehicles are examples of partial zero-emission vehicles (PZEVs).
A)True
B)False
Q3) Reformulated fuel contains more oxygen to permit more complete combustion and to lower carbon monoxide emissions.
A)True
B)False
Q4) A benefit-based standard is one that
A) considers the benefits balanced with the costs of that standard
B) maximizes the marginal external benefit (MEB) of the standard
C) is set to the point at which MEB is zero
D) none of the above
Q5) Ethanol (E85) is a blend of 85 percent ethanol and 15 percent gasoline.
A)True
B)False
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Chapter 12: Improving Air Quality: Controlling Stationary Sources
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Sample Questions
Q1) Suppose Michigan's NO<sub>X</sub> abatement standard for existing (E) sources is 4 units and the EPA's standard for new (N) sources is 10 units and that MAC<sub>E</sub> = 1.8A<sub>E</sub> and MAC<sub>N</sub> = 1.2A<sub>N</sub>. To meet the same combined abatement level of 14 but in a cost-effective manner, the standards for each should be
A) A<sub>E</sub> = 7; A<sub>N</sub> = 7
B) A<sub>E</sub> = 4.8; A<sub>N</sub> = 7.2
C) A<sub>E</sub> = 5.6; A<sub>N</sub> = 8.4
D) none of the above
Q2) Explain why the current abatement levels for the two sources do not achieve cost effectiveness.
Q3) Under a bubble policy, a facility is allowed to measure its emissions as an average of all releases from that facility.
A)True
B)False
Q4) Primary sources of SO<sub>2</sub> emissions are
A) fossil-fuel burning power plants and refineries
B) heavy-duty trucks and buses
C) light-duty trucks and automobiles
D) commercial aircraft
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Chapter 13: Global Air Quality: Policies for Ozone Depletion and Climate Change
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Sample Questions
Q1) The proposed GHG controls on stationary sources in the United States
A) recommends the use of permits with no emissions standards
B) involve subsidies for the development of new abatement technologies
C) include permitting requirements and emissions standards
D) recommend significant monetary penalties on power plants releasing GHGs
Q2) Which of the following are among the effects of CFC usage?
A) increased cases of skin cancer
B) acidification of surface waters
C) urban smog
D) all of the above
Q3) During the Bush administration, the United States ratified the Kyoto Protocol.
A)True
B)False
Q4) Renewable energy certificates are market instruments that represent the displacement of power generated by fossil fuels, an outcome that helps to reduce GHG emissions.
A)True
B)False
Page 15
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Chapter 14: Defining Water Quality: the Standard-Setting Process
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Sample Questions
Q1) The Water Quality Act of 1987 embodies revisions to the Clean Water Act of 1977. A)True
B)False
Q2) An aquifer refers to any water body exposed to the atmosphere.
A)True
B)False
Q3) There are three classifications of water pollutants: toxic, conventional and nonconventional.
A)True
B)False
Q4) The phenomenon that explains the interdependence of water resources and the natural movement of water from the atmosphere to the surface, to beneath the ground, and back to the atmosphere is the
A) estuarial cycle
B) runoff process
C) hydrologic cycle
D) watershed progression
Q5) Water runoff from a major highway is an example of a point source. 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) From an economic perspective, the zero discharge goal meets the efficiency criterion by accounting for both the benefits and costs of that objective.
A)True
B)False
Q2) The federal grant program for POTW construction
A) displaced the Clean Water State Revolving Fund (CWSRF) Program
B) assured that the larger proportion of spending on POTW construction was at the local level
C) lowered the federal cost share in 1985 to reduce inherent inefficiencies
D) encouraged cost-effective decision making at the municipal level
Q3) If the effluent limitations are insufficient for a water body, that water body is considered to be "water quality limited," requiring more stringent controls called total maximum daily loads (TMDLs).
A)True
B)False
Q4) A volume-based effluent fee is based on the degree of harm linked to the contaminant released.
A)True
B)False
Page 17
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Chapter 16: Protecting Safe Drinking Water
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Sample Questions
Q1) In the United States, the first law dealing with drinking water was passed in the 1920s.
A)True
B)False
Q2) The maximum contaminant level (MCL) for a drinking water contaminant
A) is not enforceable
B) is set using benefit-cost analysis since the enactment of the 1996 SDWA amendments C) is solely benefit based like the maximum contaminant level goals (MCLGs)
D) is set to maximize the total social benefits (TSB) of abating that contaminant
Q3) Secondary maximum contaminant levels (SMCLs) are enforceable drinking water standards that are set to protect public welfare.
A)True
B)False
Q4) The most common pricing structure used for drinking water in the United States is the increasing block rate structure.
A)True
B)False
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Chapter 17: Managing Hazardous Solid Waste and Waste Sites
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Sample Questions
Q1) A permit system is used to control hazardous waste management at treatment, storage, and disposal facilities (TSDFs).
A)True
B)False
Q2) The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund, was the first legislative act aimed at hazardous waste sites in the United States.
A)True
B)False
Q3) The Brownfields Act was passed during the Obama administration and deals with abandoned properties whose redevelopment is compromised by contamination.
A)True
B)False
Q4) Identification of hazardous wastes under the law relies on risk-benefit analysis.
A)True
B)False
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Page 19
Chapter 18: Managing Municipal Solid Waste
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Sample Questions
Q1) Which of the following statements about deposit/refund systems is INCORRECT?
A) Most deposit/refund systems in the United States are used for beverage containers and lead-acid batteries.
B) Some nations use deposit/refund systems for automobile bodies.
C) The deposit is imposed at the time of purchase like a retail disposal charge.
D) To be a viable system, the refund must be exactly equal to the deposit.
Q2) The recycling rate in the United States is higher than that of any other nation in the world.
A)True
B)False
Q3) 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
Q4) The highest proportion of products in the MSW stream is consumer electronics.
A)True
B)False
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Page 20
Chapter 19: Controlling Pesticides and Toxic Chemicals
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Sample Questions
Q1) The Green Chemistry Program calls for a commitment by all participants in the product cycle to reduce environmental effects of products.
A)True
B)False
Q2) Pesticide registration results in a formal listing with the EPA that is based on benefit-cost analysis.
A)True
B)False
Q3) The primary goal of the Pesticide Environmental Stewardship Program (PESP) is to regulate pesticide use.
A)True
B)False
Q4) The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)
A) is the primary law that governs U.S. pesticide policy
B) uses registration of new pesticides and reregisration of existing pesticides as its chief regulatory instruments
C) was revised through the Pesticide Registration Improvement Act of 2003
D) all of the above
E) none of the above
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Chapter 20: Sustainable Development: International Environmental Agreements
and International Trade
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Sample Questions
Q1) Both environmentalists and free trade advocates supported the General Agreement on Tariffs and Trade (GATT).
A)True
B)False
Q2) The Border 2012 Program involving the United States and Mexico has a broad agenda, including improving air and water quality, tracking hazardous waste, and promoting pollution prevention.
A)True
B)False
Q3) The United States ratified the Kyoto Protocol in 2001 during the Bush administration.
A)True
B)False
Q4) Transboundary pollution linked to electricity generation can be modeled as an international externality whereby the MSB is lower than the MEB of electricity.
A)True
B)False
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Page 22
Chapter 21: Sustainable Approaches: Industrial Ecology and
Pollution Prevention
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Sample Questions
Q1) The United States is the only country to legislate pollution prevention.
A)True
B)False
Q2) ISO 14000 refers to mandatory internationals standards for environmental management.
A)True
B)False
Q3) Extended product responsibility (EPR) places all the onus of product stewardship on the producer.
A)True
B)False
Q4) Remanufacturing involves collecting, disassembling, reconditioning, and reselling returned products.
A)True
B)False
Q5) A major component of the ISO 14000 standards addresses life cycle assessments. A)True
B)False
Page 23
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