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| 1 | |
Suppose Ole and Lena each own a tradable quota that allows them to catch 1000 tons of salmon for this year. Each owns a boat with a capacity of 2000 tons, but Lena's fishing cost is $2000 per ton while Ole's cost is $1800 per ton. If the market price of salmon is expected to be $2200 per ton and tradable quotas are currently priced at $250 per ton: |
| | A) | Lena will increase her profits by selling her quota to Ole |
| | B) | Ole will increase his profits by selling his quota to Lena |
| | C) | Both Lena and Ole would like to sell their quotas on the open market |
| | D) | Both Lena and Ole would like to buy an additional 1000-ton quota on the open market |
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| 2 | |
Per capita U.S. consumption of solids—plastics, metals, and the like—has: |
| | A) | increased since 1990, as measured by the extraction rates of ore and crude oil |
| | B) | increased since 1990, as measured by the increase in real GDP |
| | C) | decreased since 1990, as measured by the commodity price index |
| | D) | leveled off since 1990, as measured by per capita trash generation |
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| 3 | |
Which of the following best explains the movement of the commodity price index over the last 100 years? |
| | A) | The index has fallen because the supply of commodities has increased faster than the demand for them |
| | B) | The index has fallen because the demand for commodities has increased faster than the supply of them |
| | C) | The index has risen because the supply of commodities has fallen while the demand has risen |
| | D) | The index has fallen because the demand for commodities has fallen while the supply has risen |
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| 4 | |
Suppose a coal mining firm predicts that the demand for coal (and hence its price) will grow faster than previous forecasts had indicated. This change in outlook will: |
| | A) | increase the current user cost of coal and increase the current rate of extraction |
| | B) | increase the current user cost of coal and decrease the current rate of extraction |
| | C) | decrease the current user cost of coal and increase the current rate of extraction |
| | D) | decrease the current user cost of coal and decrease the current rate of extraction |
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| 5 | |
In attempting to minimize costs, a fundamental problem facing electricity generating companies is that: |
| | A) | power plants with the lowest operating costs per kilowatt hour tend to have the highest fixed construction costs |
| | B) | federal law limits mixing generator technologies in a given utility district |
| | C) | the prices of various energy sources is highly variable over the year, but the demand for them is stable |
| | D) | marginal cost exceeds average cost for all reasonable output levels |
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| 6 | |
Suppose you own property containing a small vein of copper ore. By mining and selling the copper today, you could get net benefits of $4.00 per pound. Alternatively, you could wait for one year and get net benefits at that time of $4.10 per pound. If the interest rate is 5%, you should: |
| | A) | mine the copper next year, since the market price may go up even further |
| | B) | mine the copper next year, since $4.10 exceeds $4.00 |
| | C) | mine the copper today, since the present value of $4.10 received next year exceeds $4.00 |
| | D) | mine the copper today, since $4.00 today could be invested and return $4.20 next year |
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| 7 | |
Refer to the following:
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Suppose the current market price of this non-renewable resource is $10. Extraction costs are given by EC and the user cost is $3. In the first year, the firm depicted in the diagram should extract |
| | A) | none of this resource, as the total cost of the resource exceeds $10 |
| | B) | all of this resource, as the user cost is only $3, which is less than the market price |
| | C) | Q0 units of the resource, as the total cost of extracting units in excess of this amount exceeds the market price |
| | D) | Q1 units of the resource, as the user cost concept only applies to renewable resources |
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| 8 | |
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If the graph shows the typical growth pattern of a forest, forest companies will most likely harvest the trees at a time somewhere: |
| | A) | between 0 and T0 |
| | B) | between T0 and T1 |
| | C) | between T1 and T2 |
| | D) | after T2 |
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| 9 | |
If a firm expects it might lose the property rights to a natural resource it currently controls: |
| | A) | its user cost will rise and it will decrease its current rate of extraction |
| | B) | its user cost will fall and it will decrease its current rate of extraction |
| | C) | its user cost will rise and it will increase its current rate of extraction |
| | D) | its user cost will fall and it will increase its current rate of extraction |
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| 10 | |
The overall supply of oil is upward sloping because: |
| | A) | some sources of oil, such as biodiesel, are more costly than other sources, such as tar sands. |
| | B) | the higher the price of oil, the lower the amount demanded |
| | C) | increases in the price of oil increase the supply of oil |
| | D) | oil exporting countries regulate the price of oil to match consumer willingness to pay |
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