Oil and Natural Gas Assignment PDF

Question 1: Which of the following are considered nonrenewable
resources?
Select all that apply.
o o Oil
o o Fish
o o Trees
o o Natural gas
o o Wheat
Answer 1: Oil and Natural Gas
Question 2: According to Hotelling's Rule:
Select all that apply.
o o The price of a nonrenewable resource will grow based on the interest rate
o o Nonrenewable resource rent is maximized when the growth of the resource
price equals the interest rate
o o If the price of a nonrenewable resource grows faster than the interest rate
then there is an incentive to extract the resource quickly
o o Opportunity cost is important when deciding whether to extract or leave a
nonrenewable resource in the ground
o o The price of a nonrenewable resource falls as the resource is depleted
Answer 2:
Nonrenewable resource rent is maximized when the
growth of the resource price equals the interest rate.
The price of a nonrenewable resource will grow based
on the interest rate
Question 3: Which of the following apply to renewable resources with
a growth function?
Select all that apply.
o o Carrying capacity determines the maximum quantity the resource can
exist at
o o Economic rents are depleted under open access if the resource is
nonexcludable and rival
o o The optimal level of extraction effort rises if the marginal revenue of
extraction rises
o o The optimal level of extraction effort falls if the marginal cost of
extraction falls
Harvesting at the maximum sustainable yield maximizes economic

rent
Answer 3:
Carrying capacity determines the maximum quantity
the resource can.
The optimal level of extraction effort rises if the
marginal revenue of extraction rises
Harvesting at the maximum sustainable yield
maximizes economic rent
Question 4: According to the IPAT equation:
Select all that apply.
o o Advancements in clean technology reduce our impact on the
environment
o o Increasing consumption per person increases our impact on the
environment
o o Population growth doesn't matter
o o Overconsumption is not possible
o o Sustainability requires that population and consumption per person both
decline
Answer 4:
Increasing consumption per person increases our
impact on the environment
Overconsumption is not possible
Question 5: According to the Easterlin paradox:
Select all that apply.
o o Poor individuals are happier than rich individuals
o o There exists diminishing returns for money
o o Rich individuals are only slightly happier than middle class individuals
o o Money buys happiness no matter how much you already have
o o Money buys happiness if you are very poor
Answer 5:
There exist diminishing returns for money
Rich individuals are only slightly happier than middle
class individuals

Question 6: Which of the following can potentially impact the
effectiveness of government and policy?
Select all that apply.
o o Public support
o o Uncertainty
o o Monetary support
o o Lobbying
o o Incomplete information
Answer 6:
Public support
Uncertainty
Question 7: Incentive based regulation is often preferable to
command and control for which of the following reasons?
Select all that apply.
o o It requires more information
o o It incentivizes research and development for clean technology
o o It is the only way to achieve the optimal level of pollution
o o It encourages continual reduction in pollution
o o It is easier to achieve cost-effectiveness
Answer 7:
It incentivizes research and development for clean
technology
It encourages continual reduction in pollution
It is easier to achieve cost-effectiveness
Question 8: Which of the following hold true for cost-effective
pollution control?
Select all that apply.
o o Pollution is reduced at the lowest possible cost
o o The marginal cost of reducing pollution is equal at all pollution sources
o o All pollution sources reduce pollution by the same amount
o o The total cost of reducing pollution is equal at all pollution sources
o o Cost effectiveness is only achievable if all pollution sources have the same
abatement cost curve

Answer 8:
Pollution is reduced at the lowest possible cost
The marginal cost of reducing pollution is equal at all
pollution sources
Question 9: According to the double dividend hypothesis:
Select all that apply.
o o The second dividend comes from using revenues to address other market
failures
o o The first dividend comes from correcting a market failure
o o Environmental policy that generates revenue has the potential to
generate a win-win
o o There are no losers from a double dividend policy, only winners
o o Both dividends always benefit the environment
Answer 9:
The second dividend comes from using revenues to
address other market failures
Environmental policy that generates revenue has the
potential to generate a win-win
Question 10: Which of the following are potential problems when
using a cap-and-trade system?
Select all that apply.
o o Hot spots may arise
o o Too many buyers and sellers can make it hard to trade permits
o o Permit prices can be volatile
o o Monitoring and enforcement can be difficult
o o Policy makers don't know in advance the level of pollution that will result
Answer 10:
Permit prices can be volatile
Too many buyers and sellers can make it hard to trade
permits
Hot spots may arise
Question 11: Which of the following apply to clean technology?
Select all that apply.

o o Government can speed up adoption
o o It is environmentally superior to existing technologies
o o It is less profitable than existing technologies in the long run
o o It provides a service of similar quality to existing technologies
o o Market obstacles can prevent adoption
Answer 11:
Government can speed up adoption
It provides a service of similar quality to existing
technologies
Market obstacles can prevent adoption
Question 12: Which of the following are ways the government can
help promote clean technology?
Select all that apply.
o o Set technology standards
o o Fund research and development to advance the clean technology
o o Tax the clean technology
o o Subsidize competing technologies
o o Provide information on the clean technology
Answer 12:
Subsidize competing technologies
It provides a service of similar quality to existing
technologies
Question 13: Suppose in a particular market that the elasticity of
demand is 0.5 and the elasticity of supply is 0.75 and the government
subsidizes producers. This implies that:
Select all that apply.
o o Producers benefit more than consumers
o o Demand is more elastic than supply
o o Demand is elastic
o o Consumers benefit more than producers
o o Supply is more inelastic than demand
Answer 13:

Demand is more elastic than supply
Producers benefit more than consumers
Question 14: Which of the following are reasons that there may be an
inverted U-shape relationship between economic development and
environmental harm (EKC hypothesis)?
Select all that apply.
o o Higher consumption increases dependence on natural capital
o o Development leads to changes in economic composition
o o Political demand for environmental policy increases
o o Wealthier societies care less about the environment
o o Higher education increases environmental awareness
Answer 14:
Political demand for environmental policy increases
Higher education increases environmental awareness
Question 15: Which of the following are true for population growth?
Select all that apply.
o o Those who work more tend to have more kids
o o Malthus was correct that population growth would outpace food supply
o o Population growth tends to slow with rising income
o o Women have more children on average in developed countries
o o High population growth and high poverty rates can create a vicious cycle
Answer 15:
Higher education increases environmental awareness
Malthus was correct that population growth would
outpace food supply
Question 16: Which of the following are NOT potential strategies for
lowering the pressure of population growth on the environment?
Select all that apply.
o o Limit the number of children people can have
o o Increase education, especially for women
o o Reduce infant and childhood mortality

o o Reduce poverty
o o Subsidize families with children
Answer 16:
Limit the number of children people can have
Subsidize families with children
Question 17: Which of the following factors make environmental
regulation more difficult in poor countries?
Select all that apply.
o o Trade that helps transfer clean technology
o o Political institutions are often less democratic
o o Bureaucrats are low paid and more easily corruptible
o o Citizens have a lower willingness to pay for environmental protection
o o Monitoring and enforcement is often weaker
Answer 17:
Political institutions are often less democratic
Monitoring and enforcement is often weaker