If Proved Reserves of a Mineral Amount to Twelve Years

question 186

Multiple Choice

If proved reserves of a mineral amount to twelve years of use at the current rate of consumption,

• A) it is likely, though not certain, that we will run out of that mineral in about twelve years.
• B) we are likely to run out of the mineral in less than twelve years if our rate of use has been increasing.
• C) if the good becomes more scarce relative to supply in the future, its price will rise and thereby encourage both conservation and exploration.
• D) if proved reserves diminish, lower prices will extend the day of exhaustion well into the future.

---

Definitions:

Budget

An accounting device used to plan and control resources of operational departments and divisions.

Static Budget

A fixed budget that does not change or adjust to variations in business activity levels throughout the budget period.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, useful for managerial control and performance evaluation as it reflects real-time operations rather than fixed forecasts.

Master Budget

An all-encompassing financial planning document that consolidates all of an organization's budgets for sales, production, overhead, and cash flow.