Quiz 1 2014 - 1 (Pauta)

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Name:_____________________ 
 
 
Pontificia Universidad Católica de Chile 
Ciencias Económicas y Administrativas 
Instituto de Economía 
 
EAE 295 
 
ENVIRONMENTAL AND NATURAL RESOURCE ECONOMICS 
 
 
Quiz 1 
 
Multiple Choice Questions (5 pts each) 
1. Which one of the following statements is false? 
 
a) The 1992 United Nations Conference on Environment and Development identified 
environmental issues as the primary issue determining the future of humanity 
b) Many proposals to improve environmental quality are rejected on the grounds that they 
will reduce economic growth 
c) Standard neoclassical economic theory does not address the management of 
common property resources 
d) Externalities are also referred to as third-party effects 
e) Natural systems rely on a continual supply of solar energy 
 
2. What is the key to escaping the Malthusian trap? 
a) Increasing productivity per capita 
b) Increasing population 
c) Increasing natural capital 
d) Increasing population density 
e) Definition of property rights 
 
3. What does the Coase theorem say about equity? 
a) An equitable outcome will occur whenever property rights are well defined 
b) An equitable outcome will occur whenever transactions costs are zero 
c) An equitable outcome will occur whenever those affected by an externality have the 
property rights 
d) An equitable outcome will occur as long as an efficient outcome is achieved 
e) Nothing 
 
Name:_____________________ 
 
 
4. The socially optimal provision of a public good can be obtained by ... 
a) Privatizing the good 
b) Vertically adding the demand curves for the good 
c) Horizontally adding the demand curves for the good 
d) Eliminating access to the good 
e) Allowing open access to the good 
 
5. Which one of the following statements is false? 
a) Market solutions are always economically efficient 
b) Problems with global commons are partly a result of free riding 
c) Public preferences are not always expressed in markets 
d) Public and private preferences may differ 
e) Public goods often tend to be undersupplied 
 
6. Which one of the following statements does not indicate an important difference between 
traditional economics and ecological economics? 
a) Ecological economics places greater emphasis on the importance of energy 
resources 
b) Ecological economics places greater emphasis on the carrying capacity of the 
environment 
c) Ecological economics places greater emphasis on the scale of economic activity 
d) Ecological economics places greater emphasis on the importance of natural laws 
e) Ecological economics places greater emphasis on the flow of goods between 
households and firms 
 
7. What is the term for a resource that is not privately owned but managed for the social 
good? 
a) Open-access resource 
b) Renewable resource 
c) Nonrenewable resource 
d) Commons 
e) Paradigm 
 
 
Name:_____________________ 
 
 
 
8. Which one of the following statements is false? 
a) Global warming and ocean pollution are examples of global commons issues 
b) Solving problems with global commons usually requires international cooperation 
c) Problems with the global commons are becoming more prevalent as human economic 
activity increases 
d) Problems with global commons occur because countries view their global environmental 
impacts as externalities 
e) Solving problems involving global commons is not possible because of free rider effects 
 
9. Which one of the following is not a possible limitation of using the Coase theorem to guide 
environmental policy? 
a) The free rider effect 
b) The holdout effect 
c) Voluntary transactions cannot protect the environment 
d) Poor communities are likely to bear a high proportion of environmental costs 
5) Transactions costs are likely to be high when many parties are involved 
 
10. The concept of industrial ecology... 
a) Requires the elimination of fossil fuel use 
b) Seeks to apply ecological principles to pollution management 
c) Applies industrial techniques to the management of the natural world 
d) Seeks to increase energy supplies 
e) Differentiates between wants and needs 
 
11. In order to achieve a society that develops sustainably, 
a) Analysis based on both ecological and standard environmental economics is required 
b) Environmental economic analysis is ineffective 
c) The global macroeconomic scale must be increased 
d) Attempts to economically value natural resources must be avoided 
e) Property rights must be assigned for all natural resources 
 
Name:_____________________ 
 
 
 
12. In contrast to the basic Limits to Growth model, the “sustainable world” model shows: 
a) Higher global population and lower world food supply 
b) Global population and pollution would both be higher 
c) Global population would be lower but resources would be scarcer 
d) Global population would be lower but food supply would be higher 
e) Global population and industrial output would be lower 
 
13. A characteristic of public goods is that use of the good by one person does not reduce its 
availability to others. The term for this characteristic is... 
1) Non-exclusive 
2) Transferable 
3) Non-rival 
4) Perfectly elastic 
5) Free-rider 
 
14. The ability of the environment to absorb and render harmless the by-products of human activity 
is called 
a) Carrying capacity 
b) The sink function 
c) Depletion 
d) Throughput 
e) The source function 
 
15. Suppose that making shoes creates pollution, a negative externality. To incorporate 
the externality in a market graph we would 
a) Add the externality cost to the market demand curve 
b) Subtract the externality cost from the market demand curve 
c) Add the externality cost to both the market supply curve and the market demand curve 
d) Add the marginal externality cost to the market supply curve 
e) Add the externality cost to the market supply curve 
 
Name:_____________________ 
 
 
 
16. The open access equilibrium is usually 
a) Economically efficient but ecologically unsustainable 
b) Economically efficient and ecologically sustainable 
c) Economically inefficient but ecologically sustainable 
d) Neither economically efficient nor ecologically sustainable 
e) Highly profitable for resource users 
 
17. Which one of the following statements best describes the future global environmental situation? 
 
a) Population must be dramatically reduced to prevent ecological collapse 
b) Increased reliance on fossil fuels is required to meet future energy needs 
c) Global ecological collapse is inevitable 
d) Living standards must be reduced in all countries to achieve a sustainable society 
e) Increased resource demands must be balanced with ecological carrying capacity 
 
18. In a market supply and demand graph, the socially efficient outcome occurs 
a) Where the private marginal benefits intersect with the social marginal costs 
b) Where the private marginal benefits intersect with the private marginal costs 
c) Where the social marginal benefits intersect with the social marginal costs 
d) Where the social marginal benefits intersect with the private marginal costs 
e) Where externalities are maximized 
 
19. Which of the following is an example of the source function of the environment? 
a) Trees absorb some of the carbon dioxide emitted by human activity 
b) Wetlands reduce the pollution levels in water 
c) Winds carry air pollution away from a city 
d) Humans harvest fish from the oceans 
e) Bacteria break down discarded wastes 
 
20. The efficient price of a license fee is determined by the difference between 
a) Marginal revenue and marginal cost 
b) Average revenue and marginal cost 
c) Total revenue and total cost 
d) Average revenue and total cost 
e) Total revenueand marginal cost