Use the Information Below to Answer the Following Questions

question 48

Multiple Choice

Use the information below to answer the following questions.
Fact 18.4.1
Water is a natural resource that is plentiful in Canada but not plentiful in Arizona and southern California. Suppose Canadians start to export bulk water to Arizona and southern California.
-Refer to Fact 18.4.1. The Hotelling Principle ________ apply to Canada's water because the Hotelling Principle ________.

• A)does; applies to renewable resources and water is a renewable resource
• B)does; only applies when the interest rate is falling
• C)does not; applies to nonrenewable resources but water is a renewable resource
• D)does not; only applies when the interest rate is rising
• E)does; applies when interest rates are relatively low

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Definitions:

Marginal Benefit

The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Marginal External Damages

Additional harm or cost imposed on society or a third party that is not accounted for by the producer or consumer of a good or service.

Marginal Social Cost

The total cost to society of producing an additional unit of a good or service, including both the cost to the producer and the cost to society of any environmental or other externalities.

Monopoly

Market with only one seller.