PrepTest 156, Section 2, Question 23
When a resource's price reflects its full cost(71 more words not shown)
The conclusion follows logically if(7 more words not shown)
- AWhatever constitutes unintended(10 more words not shown)
- BA resource's externalities(12 more words not shown)
- CWhen setting a(18 more words not shown)
- DIf a resource(9 more words not shown)
- EThe price of(18 more words not shown)
Reading the argument
Imagine using fuel creates pollution that harms people who aren't buying the fuel. A price that includes that harm would make the buyer pay for more than the fuel itself. That extra cost might encourage less driving or more biking. This is the idea behind making consumers pay for an externality: an unintended harm to society from using the resource.
I might wonder how anyone measures that harm precisely. I might also think even an ordinary fuel price gives people some reason not to waste fuel. But the argument gives us its own requirement: the price deters misuse only if it reflects the externalities. Work with that requirement for this question.
Now follow the chain. Sound management requires a price that deters misuse, and deterrence requires a price that reflects externalities. So sound management requires pricing in those unintended harms to society.
What we’re looking for
The conclusion brings in harm to the environment. My first reaction is that environmental harm might not be the only externality. What about harms to society that aren't environmental? I'd initially be looking for a connection strong enough to cover that concern. Since we're asked to make the conclusion follow, we need to check exactly what the conclusion demands before deciding how strong that connection must be.
Working the answers
- ACorrect
This is enough once we read the conclusion carefully. The conclusion requires including environmental harm in the price. It does not say environmental harm is the only harm that needs to be included.
A puts unintended environmental harm inside the category of unintended social harm. Externalities are those social harms, and we already know sound management requires reflecting externalities in the price. Therefore, it requires reflecting the environmental harms too.
My initial objection demanded too much. Other externalities can exist and still need to be priced in. We only have to show that environmental harm belongs among the required costs, not that it makes up the entire category.
- B
This says externalities are always taken into account when prices are set. The argument doesn't need that to happen universally; it gives a requirement for sound management. More importantly, B still doesn't establish that environmental harm counts as an externality, so it leaves the crucial connection missing.
- C
Being able to forecast every effect could help answer our practical question about measuring costs. But knowing all the effects doesn't tell us that environmental harm is harm to society. C addresses feasibility without connecting the categories needed for this conclusion.
- D
Precisely assessing externalities doesn't establish that environmental harm is among those externalities. Even perfect assessment of one category doesn't tell us what belongs in it. We need the connection supplied by A, not a stronger claim about how accurately the existing category is measured.
- E
Other factors may matter when someone decides whether to use a resource. That doesn't affect the stated requirement that its price deter misuse for management to be sound. Nor does it connect environmental damage with unintended harm to society. The argument doesn't require price to be the only influence on anyone's choice.
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