1. Which one of the following statements is false?

• Users costs should always be set to zero to maximize economic efficiency
• Incorporation of user costs will raise current prices
• User costs can be incorporated in a market by imposing a resource depletion tax
• Government intervention may not be necessary to internalize user costs
• Consideration of user costs will reduce current production

2. Which one factor below does not influence how a resource should be allocated over time to maximize economic efficiency?

• The future marginal net benefit curve
• The current marginal net benefit curve
• Guaranteeing sufficient supplies for future users
• The discount rate
• The supply of the resource

3. Which one of the following statements is false if we increase the discount rate used to      allocate a resource?

• Current consumption of the resource will increase
• The resource will tend to be used up quicker
• The price of the resource will tend to rise faster
• The appropriate resource depletion tax will increase
• Future supplies of the resource will decrease

4. In a two-period model, the same quantity of a resource will be used in both time periods ...

• Whenever the discount rate is zero
• Whenever the supply constraint is binding
• Whenever the discount rate is set equal to the rate price is increasing
• Whenever the discount rate is zero and the marginal net benefit curves are equal
• Whenever Hotelling's rule applies

5. What economic theory tells us about the price of a non-renewable resource over time?

• Pigovian rule
• Cobb-Douglas theorem
• Hotelling's rule
• Coase theorem
• Tragedy of the commons

6. Hotelling's rule states that ...

• The net price of a resource is constant
• The price of a resource depends on the allocation of property rights
• The price of a resource is efficient as long as all user costs are internalized
• The net price of a resource rises at a rate equal to the interest rate
• The net price of a resource declines at a rate equal to the interest rate

7. Assuming Hotelling's rule applies to a resource market, which one of the following statements is false?

• The price of the resource will rise over time
• The current market price of the resource will include user costs
• The interest rate will affect the production of the resource over time
• The per unit profitability of the extracting the resource will tend to rise over time
• Interest rates will tend to rise

8. Economic theory states that the optimal depletion rate will...

• Decrease as the discount rate is raised
• Always ignore benefits to future generations
• Imply the extraction of all of a resource now as long as interest rates are positive
• Increase as the discount rate is raised
• Always create excessive pollution

9. Which one of the following statements is true?

• The use of discount rates will always maximize future benefits
• The use of discount rates becomes more problematic as longer time periods are considered
• Discount rates should always be set to zero to maximize efficiency
• Discount rates should be constant over time
• High discount rates promote resource conservation

10. If we are trying to maximize economic efficiency, which one of the following statements is true?

• Reducing current consumption to save some resources for the future may be optimal
• Consumption rates should rise at a rate equal to the rate of interest
• Maximizing current consumption is optimal
• Consumption should always be divided equally among time periods
• Consumption rates in a time period are not related to interest rates