Quiz 2

Question 1

A small country possesses unique deposits of a mineral critical for high-tech manufacturing. Given this, the country is likely to have:

Select one:
a. Less incentive to develop its own manufacturing, as raw export is profitable.
b. Increased bargaining power in trade negotiations with importers.
c. No economic benefit, as technology minerals are often inexpensive.
d. Decreased bargaining power in trade, as it relies on others for manufacturing.

Answer 1

b. Increased bargaining power in trade negotiations with importers.
c. No economic benefit, as technology

Question 2

Two countries have differing abilities to extract and process copper. Country A has rich deposits, Country B less so. Country A is highly efficient in manufacturing, Country B less so. Which leads to the greatest gain in economic welfare?

Select one:
a. Country A specializes in mining, Country B in manufacturing, both trade.
b. Both countries specialize in copper manufacturing and trade finished goods.
c. Each country produces all its own copper from extraction to finished goods.
d. Both countries specialize in copper mining and trade raw ore.

Answer 2

a. Country A specializes in mining, Country B in manufacturing, both trade.

Question 3

Analyzing the flow of mineral wealth focuses on distribution. Which is a key question distribution analysis seeks to answer?

Select one:
a. Do government royalties match the true value extracted?
b. How many total jobs are created by the mining industry?
c. How much is reinvested into exploration for new deposits?
d. What share of profits flows to local workers vs. foreign investors?

Answer 3

d. What share of profits flows to local workers vs. foreign investors?

Question 4

A country discovers its easily accessible mineral deposits are nearing depletion. How might this impact its imports and exports?

Select one:
a. No significant change, as other factors drive trade flows.
b. Decreased imports of goods produced with those minerals.
c. Increased imports of the raw minerals themselves.
d. Increased exports of goods produced with those minerals.

Answer 4

c. Increased imports of the raw minerals themselves.

Question 5

A global recession puts downward pressure on mineral prices. To protect its mining industry, a nation might:

Select one:
a. Impose quotas on mineral imports to protect domestic producers.
b. Offer tax holidays to attract foreign mining investment.
c. Devalue its currency on a fixed exchange rate system.
d. Increase environmental regulations on the mining sector.

Answer 5

d. Increase environmental regulations on the mining sector.

Question 6

A nation rich in mineral resources employs mostly low-skilled labor in its mines. To increase the benefits flowing to its citizens, the government should prioritize:

Select one:
a. Nationalizing the mines to ensure all profits remain within the country.
b. Reducing environmental regulations to entice more mining investment.
c. Promoting downstream processing to create more value-added jobs.
d. Raising royalties on mineral extraction by foreign-owned companies.

Answer 6

c. Promoting downstream processing to create more value-added jobs.

Question 7

A country shifts from a fixed exchange rate to a floating one. How might this affect its mineral exports?

Select one:
a. Decreased price volatility for minerals on world markets.
b. Increased volatility in mineral export revenue.
c. Immediate loss of competitiveness for its exports.
d. Increased stability for long-term mineral contracts.

Answer 7

b. Increased volatility in mineral export revenue.

Question 8

Comparing two economies, one mineral-rich and one with little mineral wealth, which is likely with higher GDP per capita?

Select one:
a. The economy with little mineral wealth, if it has a strong manufacturing base.
b. GDP per capita cannot be reliably inferred from resource endowment.
c. The mineral-rich economy, if it avoids overdependence on exports.
d. The mineral-rich economy, as resources generate direct revenue.

Answer 8

b. GDP per capita cannot be reliably inferred from resource endowment.

Question 9

A mineral-exporting nation’s currency strengthens significantly. This likely leads to:

Select one:
a. An improved balance of payments on mineral trade.
b. Its minerals becoming less affordable to foreign buyers.
c. Lower domestic production costs for its mining operations.
d. Government incentives to reduce mineral exploitation.

Answer 9

b. Its minerals becoming less affordable to foreign buyers.

Question 10

A new mine opens in a rural region, generating jobs and a sudden influx of wealth. Which of these is the most likely immediate economic consequence?

Select one:
a. A reduction in property taxes as the need for local services rises.
b. An outward shift in the region’s production possibilities frontier.
c. A more equal distribution of income within the local community.
d. An increase in the local savings rate among the newly employed miners.

Answer 10

b. An outward shift in the region’s production possibilities frontier.

Question 11

A mineral-rich nation experiences rapid economic growth fueled by exports. To make this growth sustainable, it should invest in:

Select one:
a. Building infrastructure and expanding its capital base.
b. Restricting mineral exports to conserve resources for the future.
c. Reducing imports to protect domestic manufacturing industries.
d. Expanding its agricultural sector for greater self-sufficiency.

Answer 11

a. Building infrastructure and expanding its capital base.

Question 12

A spike in fuel prices hits a mining-dependent economy heavily. Which measure most clearly reveals this impact compared to standard GDP?

Select one:
a. The Human Development Index (HDI).
b. The rate of inflation.
c. Purchasing Power Parity (PPP).
d. The GDP deflator.

Answer 12

d. The GDP deflator.

Question 13

A small country possesses unique deposits of a mineral critical for high-tech manufacturing. Given this, the country is likely to have:

Select one:
a. Increased bargaining power in trade negotiations with importers.
b. Decreased bargaining power in trade, as it relies on others for manufacturing.
c. Less incentive to develop its own manufacturing, as raw export is profitable.
d. No economic benefit, as technology minerals are often inexpensive.

Answer 13

a. Increased bargaining power in trade negotiations with importers.

Question 14

A nation with strict environmental laws discovers large mineral deposits in sensitive areas. How might this affect its transport cost market-value curve?

Select one:
a. Curve becomes steeper, production limited to higher-value minerals.
b. Curve becomes flatter, favoring large-scale, low-value extraction.
c. Curve shifts upward overall, increasing production costs even for existing mines.
d. Curve becomes less predictable, as regulations add uncertainty.

Answer 14

a. Curve becomes steeper, production limited to higher-value minerals.

Question 15

A nation with significant iron ore deposits discovers it’s cheaper to import manufactured steel goods than to produce its own, despite having domestic smelters. This suggests:

Select one:
a. The nation lacks a comparative advantage in steel manufacturing.
b. Protectionist tariffs are likely to improve the situation.
c. The nation’s steel producers must increase their margin of superiority.
d. The nation is experiencing a decline in its iron ore reserves.

Answer 15

a. The nation lacks a comparative advantage in steel manufacturing.

Question 16

Historically, many resource-rich countries have experienced the “resource curse” – economic underperformance despite their assets. A major contributing factor is often:

Select one:
a. Overly progressive taxation discouraging further mineral development.
b. Excessive consumption of resource wealth rather than investment.
c. Overemphasis on labor-intensive production methods.
d. Strict environmental regulations limiting the volume of production.

Answer 16

b. Excessive consumption of resource wealth rather than investment.

Question 17

A shift towards renewable energy increases demand for certain minerals (e.g., lithium). For a country already exporting those minerals, this likely leads to:

Select one:
a. Reduced economic benefit as more supply creates lower prices.
b. Improved terms of trade, as importers compete for the resource.
c. Decline in its manufacturing sectors that don’t use these minerals.
d. Need to form a commodity cartel to protect economic interests.

Answer 17

b. Improved terms of trade, as importers compete for the resource.

Question 18

A shift towards renewable energy sources reduces demand for certain minerals but increases it for others. This highlights the concept of:

Select one:
a. The limits of mineral resource substitution in modern industry.
b. The uneven pace of technological change within sectors.
c. The changing composition of mineral use in economic development.
d. Declining intensity of mineral use in the global economy.

Answer 18

c. The changing composition of mineral use in economic development.

Question 19

A mining company is considering two potential deposits. One contains high-value diamonds, the other bulky iron ore. Which factor will be MORE important for the diamond operation’s location decision?

Select one:
a. The corporate tax rate in the host country.
b. Proximity to skilled labor for mineral processing.
c. Distance to markets or transportation infrastructure.
d. Environmental regulations in the potential mining area.

Answer 19

c. Distance to markets or transportation infrastructure.

Question 20

Historically, the development of mineral resources for export has had mixed results for some nations. A key factor determining the benefits to the exporting nation is:

Select one:
a. The environmental impact caused by the extraction processes.
b. The degree of value-adding before the mineral is exported.
c. Whether the nation has domestic manufacturing using that mineral.
d. The presence of a strong labor union in the mining industry.

Answer 20

b. The degree of value-adding before the mineral is exported.