ENVIRONMENTAL ECONOMICS EXAM
PREP QUESTIONS AND ANSWERS 2026
STUDY GUIDE VERIFIED SOLUTIONS
●● Why must we understand economics to solve environmental
problems? Answer: Because environmental problems arise from how
humans allocate scarce resources.
●● What is economics? Answer: The study of how society decides to
use scarce resources to provide goods and services.
●● Why are all environmental problems considered economic problems?
Answer: Because they involve resource allocation, costs, benefits, and
trade-offs.
●● Why do environmental problems worsen as population increases?
Answer: Because more people require more resources and generate more
waste.
●● What is a subsistence economy? Answer: An economy where people
meet daily needs directly from nature with little trade.
, ●● What is a capitalist market economy? Answer: An economy where
buyers and sellers interact to determine what goods and services are
produced.
●● What is a centrally planned economy? Answer: An economy where
the government decides how resources are allocated.
●● What is a modern capitalist economy? Answer: A market economy
where government intervenes to regulate unfair practices, pollution, and
provide public goods.
●● Why does government intervene in modern capitalism? Answer: To
reduce inequality, manage commons, mitigate pollution, and provide
safety nets and public goods.
●● Who is associated with classical economics? Answer: Adam Smith.
●● What is the main idea of classical economics? Answer: Individuals
pursuing self-interest in competitive markets benefit society as a whole.
●● What is a major criticism of classical economics? Answer: It largely
ignores environmental impacts.
●● What is neoclassical economics based on? Answer: Supply and
demand.
PREP QUESTIONS AND ANSWERS 2026
STUDY GUIDE VERIFIED SOLUTIONS
●● Why must we understand economics to solve environmental
problems? Answer: Because environmental problems arise from how
humans allocate scarce resources.
●● What is economics? Answer: The study of how society decides to
use scarce resources to provide goods and services.
●● Why are all environmental problems considered economic problems?
Answer: Because they involve resource allocation, costs, benefits, and
trade-offs.
●● Why do environmental problems worsen as population increases?
Answer: Because more people require more resources and generate more
waste.
●● What is a subsistence economy? Answer: An economy where people
meet daily needs directly from nature with little trade.
, ●● What is a capitalist market economy? Answer: An economy where
buyers and sellers interact to determine what goods and services are
produced.
●● What is a centrally planned economy? Answer: An economy where
the government decides how resources are allocated.
●● What is a modern capitalist economy? Answer: A market economy
where government intervenes to regulate unfair practices, pollution, and
provide public goods.
●● Why does government intervene in modern capitalism? Answer: To
reduce inequality, manage commons, mitigate pollution, and provide
safety nets and public goods.
●● Who is associated with classical economics? Answer: Adam Smith.
●● What is the main idea of classical economics? Answer: Individuals
pursuing self-interest in competitive markets benefit society as a whole.
●● What is a major criticism of classical economics? Answer: It largely
ignores environmental impacts.
●● What is neoclassical economics based on? Answer: Supply and
demand.
