Question 1

When natural resources are commonly owned, the exhaustion of these resources are evenly spread over current and future periods.

Accepted Answer

When natural resources are commonly owned, there is a tragedy of the commons problem where individuals have an incentive to overuse and deplete the resource in their own interest, leading to exhaustion of the resource in a shorter period of time.

Question 2

The market for renewable resources often fail to allocate the resources to their highest-valued uses.

Accepted Answer

The answer of The market for renewable resources often fail...

Question 3

If the owner of a nonrenewable resource expects his profits to be high in future, he will abstain from resource extraction in the present period.

Accepted Answer

The answer of If the owner of a nonrenewable resource...

Question 4

If the rate of extraction of a renewable resource is greater than its rate of replenishment, the price of the resource is likely to fall in future.

Accepted Answer

If the rate of extraction of a renewable resource is greater than its rate of replenishment, the resource is likely to become scarce, which would increase its price, not decrease it.

Question 5

With the passage of time as the availability of an exhaustible resource declines, the cost of extraction of the resource increases.

Accepted Answer

This is known as the principle of decreasing marginal productivity, which states that as more units of an input are added to a production process, the overall increase in output will eventually decline. In the case of an exhaustible resource, this means that as more of the resource is extracted, it becomes harder and more expensive to extract what remains.

Question 6

Anything that affects the marginal revenue product of a nonrenewable resource will affect the demand for that resource.

Accepted Answer

The marginal revenue product of a nonrenewable resource is the extra revenue generated by using one more unit of the resource. Any factor that affects this product, such as changes in technology or the availability of substitutes, will influence the demand for the resource.

Question 7

Unlike nonrenewable resources, the timing of extraction of renewable resources are independent of the market rate of interest.

Accepted Answer

The timing of extraction of renewable resources can be influenced by the market rate of interest because the rate of interest affects the cost of capital and the opportunity cost of investing in the extraction and management of these resources. Higher interest rates can make it more expensive to invest in renewable resources, potentially delaying their extraction or development.

Question 8

If coal is extracted in an unsustainable manner in the current period, the price for steel is likely to increase in future.

Accepted Answer

Coal is a major ingredient in the production of steel. If the extraction of coal is not sustainable, it is likely that the price for coal will rise in the future, and consequently, the price of steel will increase as well.

Question 9

Privatization of common property leads to overexploitation of natural resources.

Accepted Answer

The answer of Privatization of common property leads to overexploitation...

Question 10

If a hydel power plant expects the interest rate to rise in near future, it might resort to installation of more turbines and dynamos in its firm in the present period.

Accepted Answer

By installing more turbines and dynamos in the present period, the hydel power plant can increase its generating capacity and revenue, which would then help them to offset the higher financing costs resulting from the expected rise in interest rates.

Question 11

If a nonrenewable resource is used more in the current period, the return on saving the resource for future falls.

Accepted Answer

The answer of If a nonrenewable resource is used more...

Question 12

Common ownership may fail to ensure that harvesting of renewable resources does not exceed the maximum sustainable yield.

Accepted Answer

Common ownership does not always ensure that renewable resources are managed sustainably. This is because individuals may prioritize their own short-term gain over the long-term health of the ecosystem, leading to overexploitation and depletion of resources. Proper management and regulation are necessary to ensure that harvesting does not exceed the maximum sustainable yield.

Question 13

The role of the market for renewable resources is to determine a price at which the quantity of a resource is just sufficient to enable the resource to renew itself at a rate that best satisfies society's wants.

Accepted Answer

The market for renewable resources plays a crucial role in determining the optimal price at which the quantity of the resource is enough to sustain a rate of renewal that meets the demands of society. This ensures the sustainable use of renewable resources for future generations.

Question 14

If corporate firms start offering higher dividends on their stock, the price of the exhaustible resource tends to fall in the current period.

Accepted Answer

When corporate firms offer higher dividends on their stock, investors tend to prefer investing in those stocks instead of investing in the exhaustible resource. This decreases the demand for the exhaustible resource, leading to a fall in its price in the current period.

Question 15

A fisherman will catch and sell all the fishes in his pond in response to a substantial increase in the price of the fish even if he wishes to remain in the fishing business.

Accepted Answer

Since this is an imperfectly competitive market, the fisherman may not necessarily catch and sell all the fishes in his pond in response to a price increase. There could be other factors such as limited capacity or resource constraints that could prevent the fisherman from increasing his output.

Quiz 30: the Land Market and Natural Resources