Question : 21) According to the Hotelling Principle, the price of an : 1241352

 

21) According to the Hotelling Principle, the price of an nonrenewable resource is expected to

A) fall slowly over time.

B) fall at a rate equal to the interest rate.

C) fluctuate randomly.

D) rise at a rate equal to the interest rate.

E) remain constant over time.

 

22) The price of an nonrenewable resource is expected to rise at a rate equal to the

A) rate of supply.

B) rate of population growth.

C) rate of technological change.

D) rate of demand.

E) interest rate.

 

23) According to the Hotelling Principle, the price of a nonrenewable resource is expected to

A) rise at a rate higher than the interest rate.

B) fall at a rate greater than the interest rate.

C) rise at a rate less than the interest rate.

D) rise at a rate equal to the interest rate.

E) fall at a rate equal to the interest rate.

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

A) owners will sell all that they can today.

B) owners will sell nothing today.

C) consumers will demand nothing today.

D) owners will sell their entire supply.

E) current price will probably fall.

 

25) If Saudi Arabia expects the price of oil to rise by a larger percentage than the interest rate, Saudi Arabia will ________. If Saudi Arabia expects the price of oil to rise by a smaller percentage than the interest rate, Saudi Arabia will ________.

A) hold oil off the market; want to sell oil today

B) want to sell oil today; hold oil off the market

C) decrease its demand for oil; increase its demand for oil

D) increase its demand for oil; decrease its demand for oil

E) None of the above answers is correct because the interest rate has nothing to do with Saudi Arabia’s decisions in the oil market.

 

26) The price of coal is currently $80 per ton and the interest rate is 10 percent per year. If next year’s expected price is $86 per ton, a firm that owns 1,000 tons of coal

A) will sell all its coal now.

B) will sell none of its coal now but will sell it all next year regardless of the price next year.

C) will sell none of its coal now but might sell it all next year.

D) will sell half of the coal today and half of it next year.

E) might or might not sell the coal today, depending on the price the firm paid for the coal.

27) Over time, the actual (not expected) price of a nonrenewable natural resource

A) falls.

B) rises.

C) stays the same.

D) could rise, fall, or stay the same.

E) first rises and then falls.

 

28) The equilibrium quantity of capital is

A) determined by only the supply of capital because the supply is perfectly inelastic.

B) determined by only the supply of capital because the supply is perfectly elastic.

C) expected to increase at the same rate as the interest rate.

D) determined by the supply of capital and the demand for capital.

E) the only factor of production whose quantity is not determined in a market.

 

29) The supply of each particular block of land is

A) perfectly elastic.

B) unit elastic.

C) elastic but not perfectly elastic.

D) perfectly inelastic.

E) inelastic but not perfectly inelastic.

 

30) A natural resource is renewable if it

A) never has to rest.

B) can be used repeatedly.

C) cannot be replaced once it has been used.

D) is available at a price of zero.

E) has a perfectly elastic supply.

 

31) Oil is an example of

A) a nonrenewable natural resource.

B) a renewable natural resource.

C) physical capital.

D) a resource for which the true value cannot be measured.

E) a resource with a perfectly inelastic demand.

 

32) The demand for a nonrenewable resource is

A) determined by the value of its marginal product.

B) fixed and cannot change.

C) perfectly inelastic.

D) perfectly elastic.

E) not defined because the resource can be used only once.

 

33) A producer’s supply of a nonrenewable natural resource is

A) always decreasing because the resource is always being used.

B) perfectly inelastic.

C) perfectly elastic.

D) not relevant because nonrenewable resources are used only once.

E) determined by the value of the resource’s marginal product.

 

 

 

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