The ad valorem royalties are preferred to the flat rate royalties because:

Question

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Ad valorem royalties reflect the change in the value of the mineral, which means that if the mineral price increases, the royalties will increase accordingly, generating more revenue to the government. This also encourages mining companies to improve the quality of their products, which in turn benefits both parties. Flat rate royalties, on the other hand, do not vary with the mineral price or quality and are often considered outdated and unfair.

The Ad Valorem Royalties Are Preferred to the Flat Rate