A Leading Environmental Group Recently Published a Report Contending That

question 12

Multiple Choice

A leading environmental group recently published a report contending that humans are running a "resource deficit" because we are using natural resources faster than they can be regenerated. The group claims that this means that economic growth will eventually stop, and will even be reversed. How would an economist respond to this report?

• A)An economist would agree with the report, and would point to rising natural resource prices as evidence.
• B)An economist would agree with the report, but wouldn't think it was important because growth will not slow down for several centuries.
• C)An economist would disagree with the report, in part because it ignores the mitigating effects of technological change.
• D)An economist would disagree with the report because labour and capital are the primary determinants of growth, and since they are plentiful, growth will not slow down.

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Definitions:

Increasing-Cost Industry

An industry where the costs of production increase as the output expands, often due to factors like resource depletion and higher input prices.

LRAC Curve

Long-Run Average Cost Curve, showing the lowest cost at which a firm can produce any given level of output in the long run, where all inputs are variable.

Increasing-Cost Industry

An industry in which production costs increase as firms enter the market, often due to limited resources or factors of production.

Industry Supply Schedule

A chart or graph showing the varying quantities of a product that producers are willing to supply at different price levels.