The Marginal Cost of Extraction of a Nonrenewable Resource Increases

question 16

Multiple Choice

The marginal cost of extraction of a nonrenewable resource increases with passage of time because:

• A)the technology used in extraction depreciates in value.
• B)the price of the product that uses this resource increases.
• C)the exchange rate in the international market appreciates.
• D)the tragedy of commons problem is encountered.
• E)the resource gradually becomes scarce.

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Definitions:

Discount Rate

The rate of return that is used to find the present value of a future cash flow.

Cash Outflows

The total amount of money being spent by a business, commonly on expenses like rent, materials, payroll, and other operational costs.

Cash Inflows

Cash inflows refer to the money received by a business from its operating, investing, and financing activities.

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life.