Question

1. A nonrenewable resource like gold has a fixed stock available at any point in time. However, what could lead to an increase in the known stock of gold?

a. A decrease in the market price of gold.

b. A technological advance that lowers the marginal cost of gold mining.

c. Increased government regulations to reduce the external costs from gold mining.

d. A higher tax on gold producers.

2. In the global market for oil, a decrease in global demand for oil due to Covid-19 will immediately cause______.

a.an an increase in the equilibrium price of oil

b. a decrease in the equilibrium price of oil

c. price would stay about the same

d. impossible to tell

3. Just when many nonrenewable resources seem to becoming really scarce with the price of the resource increasing a lot, suddenly the price may then decrease. Why?

a. When the price increases a lot this gives firms the incentive to spend more on research and development to find new previously unknown reserves.

b. When the price increases a lot this gives firms the incentive to spend less on research and development and the futures market collapses.

c. Because the government always steps in with price controls to force the price back down.

d. Because the government always relaxes mining regulations so that firms can extract more cheaply.

Answer 1

1. b. A technological advance that lowers the marginal cost of gold mining.

More gold mining can be done and the chances of finding gold increases.

..

2. b. a decrease in the equilibrium price of oil.

Demand curve shifts to the left thus causes both equilibrium price and quantity to fall.

...

3. d. Because the government always relaxes mining regulations so that firms can extract more cheaply. Because the government steps in seeing the prices rise, in order to increase the supply to meet the demand that prices don't rise govt relaxes mining regulations