1. Which one of the following statements is false?
- Users costs should always be set to zero to maximize economic efficiency
- Incorporation of user costs will raise current prices
- User costs can be incorporated in a market by imposing a resource depletion tax
- Government intervention may not be necessary to internalize user costs
- Consideration of user costs will reduce current production
2. Which one factor below does not influence how a resource should be allocated over time to maximize economic efficiency?
- The future marginal net benefit curve
- The current marginal net benefit curve
- Guaranteeing sufficient supplies for future users
- The discount rate
- The supply of the resource
3. Which one of the following statements is false if we increase the discount rate used to allocate a resource?
- Current consumption of the resource will increase
- The resource will tend to be used up quicker
- The price of the resource will tend to rise faster
- The appropriate resource depletion tax will increase
- Future supplies of the resource will decrease
4. In a two-period model, the same quantity of a resource will be used in both time periods ...
- Whenever the discount rate is zero
- Whenever the supply constraint is binding
- Whenever the discount rate is set equal to the rate price is increasing
- Whenever the discount rate is zero and the marginal net benefit curves are equal
- Whenever Hotelling's rule applies
5. What economic theory tells us about the price of a non-renewable resource over time?
- Pigovian rule
- Cobb-Douglas theorem
- Hotelling's rule
- Coase theorem
- Tragedy of the commons
6. Hotelling's rule states that ...
- The net price of a resource is constant
- The price of a resource depends on the allocation of property rights
- The price of a resource is efficient as long as all user costs are internalized
- The net price of a resource rises at a rate equal to the interest rate
- The net price of a resource declines at a rate equal to the interest rate
7. Assuming Hotelling's rule applies to a resource market, which one of the following statements is false?
- The price of the resource will rise over time
- The current market price of the resource will include user costs
- The interest rate will affect the production of the resource over time
- The per unit profitability of the extracting the resource will tend to rise over time
- Interest rates will tend to rise
8. Economic theory states that the optimal depletion rate will...
- Decrease as the discount rate is raised
- Always ignore benefits to future generations
- Imply the extraction of all of a resource now as long as interest rates are positive
- Increase as the discount rate is raised
- Always create excessive pollution
9. Which one of the following statements is true?
- The use of discount rates will always maximize future benefits
- The use of discount rates becomes more problematic as longer time periods are considered
- Discount rates should always be set to zero to maximize efficiency
- Discount rates should be constant over time
- High discount rates promote resource conservation
10. If we are trying to maximize economic efficiency, which one of the following statements is true?
- Reducing current consumption to save some resources for the future may be optimal
- Consumption rates should rise at a rate equal to the rate of interest
- Maximizing current consumption is optimal
- Consumption should always be divided equally among time periods
- Consumption rates in a time period are not related to interest rates