Explain how continuing technical progress may cause the price of scarce, exhaustible resources to fall over time
What will be an ideal response?
Technical progress can lower the extraction cost of exhaustible resources. This decrease in extraction costs can offset the increase in price due to the positive interest rate. This may result in lower resource prices over time.
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In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if real wealth decreases?
A) Nothing; the economy would remain at point a. B) There would be a movement to a point such as b on supply of loanable funds curve SLF0. C) The supply of loanable funds curve would shift rightward to a curve such as SLF2. D) The supply of loanable funds curve would shift leftward to a curve such as SLF1.
Suppose the current real interest rate is 4 percent and the equilibrium real interest rate is 3 percent. Then
A) prices rise and inflation occurs. B) there is a surplus of loanable funds. C) there is a shortage of loanable funds. D) there is neither a shortage nor surplus of loanable funds.