Assignment 2
Part 1: Multiple-Choice Questions (15 Questions, 4 Points Each)
1. Hotelling's Rule assumes that resource prices rise at the rate of:
a) Inflation
b) The discount rate
c) Technological growth
d) Population growth
2. A "backstop technology" becomes viable when:
a) Resource prices fall below extraction costs
b) The resource is exhausted
c) Prices rise enough to justify substitutes
d) Government bans the resource
3. Which energy source has the highest EROI (Energy Return on Investment)?
a) Tar sands
b) Wind
c) Solar PV
d) Conventional oil
4. The "Green Paradox" occurs when climate policies:
a) Accelerate fossil fuel extraction
b) Reduce energy demand permanently
c) Increase renewable energy investment
d) Have no market impact
5. Peak oil refers to the point when:
a) Oil demand peaks
b) Oil extraction rates maximize
c) Oil becomes worthless
d) Renewable energy dominates
6. Which policy is most effective for promoting renewable energy?
a) Fossil fuel subsidies
b) Feed-in tariffs
c) Price ceilings
d) Deregulation
7. Sustainable development requires:
a) Ignoring economic growth
b) Balancing economic, social, and environmental needs
c) Maximizing current resource use
d) Eliminating all pollution
8. The "Hartwick Rule" suggests that sustainability requires:
a) Investing resource rents in human capital
b) Banning all non-renewables
c) Immediate transition to renewables
d) No government intervention
9. Which factor does NOT affect the optimal extraction path of oil?
a) Future technology
b) Current demand
c) Color of the oil
d) Interest rates
10. The "energy ladder" hypothesis suggests that as incomes rise, households shift to:
a) More polluting fuels
b) Cleaner, more efficient energy sources
c) Only renewable energy
d) No energy use
11. The "resource curse" refers to:
a) High economic growth from resource wealth
b) Poor economic performance despite resource abundance
c) Rapid depletion of renewables
d) Government overregulation
12. Which renewable energy source is most intermittent?
a) Geothermal
b) Hydropower
c) Solar
d) Biomass
13. The "Jevons Paradox" suggests that energy efficiency gains may lead to:
a) Lower energy consumption
b) Higher energy demand due to lower costs
c) No change in usage
d) Government intervention
14. A carbon tax is superior to a cap-and-trade system when:
a) Pollution costs are uncertain
b) Emissions targets are flexible
c) Price stability is preferred
d) Market volatility is desired
15. Which country is the largest emitter of CO2 historically?
a) China
b) India
c) United States
d) Russia
Part 2: Short-Answer Questions (3 Questions)
1. Explain the concept of "dynamic efficiency" in resource extraction. (10 points)
2. Discuss two economic barriers to renewable energy adoption. (15 points)
3. How does the "social cost of carbon" influence climate policy? (15 points)