According to the Hotelling Principle, the price of a nonrenewable resource
A) falls at a rate equal to the interest rate.
B) falls slowly over time.
C) rises at a rate equal to the interest rate.
D) remains constant over time.

Question

Quizplus · Accepted Answer

The Hotelling Principle suggests that the price of a nonrenewable resource, like oil or minerals, should increase at a rate equal to the interest rate. This is because the opportunity cost of keeping the resource in the ground is the foregone interest that could have been earned if the resource had been extracted and sold.

According to the Hotelling Principle, the Price of a Nonrenewable