GBE Exam.docx - Global Business Summary Environment CHAPTER...

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Global Business Environment Summary C HAPTER 12: T HE E COLOGICAL E NVIRONMENT The fundamental cause of the ecological problem is: The scale and nature of production of goods and services. The fundamental cause is the quantity of goods and services produced and the techniques used to produce them. While the Chinese government is not a fundamental cause, its economy has become an important global producer of goods and is the biggest emitter of carbo dioxide. Exploration for natural resources and countries in Africa are not fundamental sources. Page Reference: 355. The argument that firms polluting the environment should pay the cost of so doing has been opposed on which of the following grounds? Big firms in rich countries with lots of financial resources will be able to afford to pay, while firms in poor countries will not. Opponents see the polluter pays principle as unfairly penalising poor economies as opposed to richer economies who can afford to pay the environmental charges. They argue that such charges neither reduce emissions nor solve climate change. Page Reference: 356. Which of the following gases is THE major contributor to global warming? Carbon Dioxide The most important greenhouse gases in terms of their contribution to climate change are carbon dioxide and methane, but carbon dioxide is the most significant Page Reference: 370. Which of the following is an example of a social cost? UK coal-fired power stations creating acid rain that causes deforestation in Norway. When power stations burn fossil fuels such as coal, they emit gases causing acid rain that can damage forests, lakes, etc. Rail lines cutting the number of commuters in cars would be an example of a social benefit, because it would reduce emissions of carbon dioxide into the atmosphere, while EU limits or fishing are aimed at preventing certain species of fish from extinction and preserving bio diversity. Page Reference: 356.
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Which of the following best represents the views of the Right regarding the ecological problem? The polluter should pay. The Right believes in the polluter pays principle i.e. that business should internalise/pay social costs of their production activities. It holds the view that there is a trade-off between growth and environmental damage – restricting environmental damage could reduce economic growth. It also believes that business, given appropriate incentives, could play an important role in developing environmentally friendly technologies. Page Reference: 358. Why might big multinational energy companies like Exxon be seriously dismayed by governments passing laws to cut significantly carbon dioxide emissions? Energy company revenues and profits could be threatened. Laws cutting carbon emissions significantly could cause a major switch from fossil fuels to other forms of energy generation. Thus, hitting company revenues and/or causing energy companies to change their methods of production which could increase costs. Both would have an adverse effect on profits.
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