According to economic theory, under perfect competition, the price of a depletable resource
A)becomes an inaccurate signal of scarcity.
B)may fall as firms will develop substitutes.
C)will be too volatile to let markets adjust.
D)will increase as firms develop new innovations to extract the resource.

Question

Quizplus · Accepted Answer

Under perfect competition, as a depletable resource becomes scarcer, its price tends to rise. This incentivizes firms to develop substitutes for the resource, which can lead to a stabilization or even a fall in its price as alternatives become available and reduce demand for the depletable resource.

According to Economic Theory, Under Perfect Competition, the Price of a Depletable