Comprehensive Final - Comprehensive Final Exam Review Q & A 1. What i...

ECS2606

Environmental Economics

Comprehensive Final Exam Review

Q & A

2024

• What is the primary impact of microeconomic policies on local

environmental sustainability?

• They have no significant impact.
• They can lead to overutilization of local resources.
• They encourage conservation of the local environment.
• They are not concerned with environmental factors.

Answer: B) Microeconomic policies, such as subsidies or taxes,

can influence individual and business behaviors, potentially leading to overutilization of local resources without proper regulatory frameworks.

• How does macroeconomic stability contribute to environmental

policy effectiveness?

• It has no correlation with environmental policies.
• It diverts attention away from environmental concerns.
• It provides a stable backdrop for long-term environmental

planning.

• It increases the volatility of environmental policy

outcomes.

Answer: C) Macroeconomic stability allows governments and

organizations to plan and implement environmental policies effectively, as it reduces the uncertainty in economic conditions that can affect policy outcomes.

• Which of the following best describes the concept of 'green

GDP'?

• GDP adjusted for income inequality.
• GDP calculated without considering environmental costs.
• GDP that accounts for environmental degradation and

resource depletion.

• GDP based solely on a country's renewable resources.

Answer: C) Green GDP is an alternative measure of economic

growth that factors in environmental costs such as degradation

and resource depletion, providing a more comprehensive view of a country's economic performance.

• In the context of environmental economics, what is the 'tragedy

of the commons'?

• The equitable distribution of common resources.
• The overuse of a resource that is not owned by anyone.
• The underutilization of public goods.
• The privatization of commonly held land.

Answer: B) The 'tragedy of the commons' refers to a situation

where individuals, acting independently and rationally according to their self-interest, behave contrary to the best interests of the whole group by depleting a common resource.

• What role do externalities play in the relationship between the

economy and the environment?

• They are irrelevant to environmental issues.
• They represent the private costs borne by businesses.
• They are the costs or benefits that affect a party who did

not choose to incur them.

• They are financial transactions between governments.

Answer: C) Externalities are costs or benefits that affect a third

party who did not choose to incur that cost or benefit. In environmental economics, negative externalities (like pollution) are significant as they represent unaccounted-for costs to society.

Question: In the context of the macroeconomy, which of the

following factors is most likely to impact the natural environment?

• Unemployment rates
• GDP growth
• Inflation

• Fiscal policy

Answer: B. GDP growth

Rationale: Economic growth, as measured by GDP, often leads

to increased consumption of natural resources and environmental degradation.

Question: How does microeconomic decision-making influence

environmental sustainability?

• By promoting resource conservation
• By maximizing profits without considering environmental

impact

• By encouraging investment in renewable energy
• By reducing waste production

Answer: B. By maximizing profits without considering

environmental impact

Rationale: Microeconomic decisions focused solely on profit

maximization may neglect environmental considerations, leading to negative impacts on sustainability.

Question: Which framework is commonly used for environmental

decision-making?

• Cost-benefit analysis
• Random selection
• Trial and error
• Intuitive decision-making

Answer: A. Cost-benefit analysis

Rationale: Cost-benefit analysis allows policymakers to

evaluate the economic and environmental costs and benefits of different policy options.