According to the Hotelling Principle, the price of a nonrenewable resource is expected to
A) fall at a rate equal to the interest rate.
B) rise at a rate lower than the interest rate.
C) rise at a rate higher than the interest rate.
D) rise at a rate equal to the interest rate.

Question

Quizplus · Accepted Answer

The Hotelling Principle suggests that the price of a nonrenewable resource, under the assumption of efficient market conditions, is expected to rise at a rate equal to the interest rate. This is because the opportunity cost of keeping the resource in the ground is equivalent to the return that could be earned on the money if it were invested elsewhere at the prevailing interest rate.

According to the Hotelling Principle, the Price of a Nonrenewable