Read the passage and mark the letter A, B, C or D on your answer sheet to indicate the best answer to each of the following questions from 1 to 10.
It is important to stress that environmental services have costs, even when they are produced without any human input. All costs ought to be measured as opportunity costs. The opportunity cost for environmental services is the net benefit forgone because the resources providing the service can no longer be used in the next most beneficial way. Resources are not free if they can be put to alternative uses.
Consider a stretch of river that can be used either for white-water canoeing or for electric power generation. Because the dam that generates the power would flood the rapids, the two uses are incompatible. The opportunity cost of saving the river for white-water canoeing is the net benefit taken out – after accounting for the cost of generation and distribution – for electricity. Conversely, the opportunity cost of building the dam is everything the unspoiled river would have produced: the recreation, the wildlife, the scenery, and whatever value future generations might place upon experiencing the rapids themselves.
This insight has far-reaching implications for development policy. [I] Many decisions that appear at first to be costless choices in favour of growth turn out, on closer inspection, to be choices against something else. [II] Cutting down a forest for cropland is not free; it is paid for in carbon storage, biodiversity, and the regulating services the forest performed silently. [III] Diverting a river to irrigate fields is not free; the price is whatever the river was doing before the diversion. [IV] Even leaving land untouched is not free, for the income that intensive use might have generated is traded off as well.
Economic development, in this view, is never simply a question of whether a project yields a positive return. It is a question of whether the return exceeds the value of what must be relinquished. Policies that recognise this – by attaching prices to scarce environmental services, or by requiring decision-makers to weigh both sides of the account – do not stand against development. They insist that the development chosen be worth what it truly costs. The danger lies not in counting too much, but in counting too little.
(Adapted from Environmental Economics and Policy)
Question 1. The word forgone in paragraph 1 is closest in meaning to _______.
A. filled up
B. given up
C. made up
D. ended up
Question 2. According to paragraph 1, the costs of environmental services are _______.
A. calculated based on the direct financial input provided for natural resources
B. insignificant as these services require almost no human labour to produce
C. determined by the market value of the natural resources themselves
D. present whether or not human effort is involved in creating these services
Question 3. Which of the following is NOT implied in paragraph 2?
A. Recreational activities and power generation impose equal environmental burdens on the river.
B. The opportunity cost of the dam construction includes intangible benefits that are sacrificed.
C. Hydroelectric generation and white-water canoeing cannot coexist on the same stretch of river.
D. The intrinsic value attached to the river may extend beyond its potential use for hydroelectric generation.
Question 4. Where in paragraph 3 does the following sentence best fit? Such hidden costs become apparent only when one pauses to consider what nature was quietly doing on its own. A. [IV]
B. [III]
C. [I]
D. [II]
Question 5. Which of the following best summarises paragraph 3?
A. Initiatives that are perceived as harmless may actually involve underlying sacrifices.
B. Policymakers should take the management of natural resources into consideration.
C. Long-term ecological balance usually takes precedence over immediate financial gain.
D. Economic growth schemes should be halted once ecological disruption is detected.
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