If a Nonrenewable Natural Resource's Price Is Expected to Increase

question 31

Multiple Choice

If a nonrenewable natural resource's price is expected to increase at a rate faster than the interest rate, then

• A) the price today will fall.
• B) the supply today will decrease.
• C) the demand today will decrease.
• D) the supply today will increase.

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Definitions:

Socially Optimal

A state in which resources are allocated in the most efficient and equitable manner from a societal perspective.

Network Externality

A situation where the value or utility of a product or service to one user increases with the number of other users of the same or compatible products or services.

Marginal Private Benefits

The additional benefit received by consumers or producers from consuming or producing one more unit of a good or service.

Negative Externalities

Unintended adverse effects on third parties not involved in an economic transaction, like pollution.