Which of the following is most likely to reduce the consumption of an exhaustible natural resource?
A)A decrease in monopoly control of the market for the resource
B)Government tax policies that give tax breaks to entrepreneurs who search for new reserves of the resource
C)Implementation of a price ceiling for the resource below its equilibrium price
D)Government macroeconomic policies that lower the interest rate on bonds

Question

Quizplus · Accepted Answer

Implementation of a price ceiling below its equilibrium price would reduce the consumption of an exhaustible natural resource as the price of the resource would be lower than the market price, leading to a decrease in demand and consumption. A decrease in monopoly control of the market for the resource might lead to lower prices, but the effect on consumption is uncertain. Government tax policies that give tax breaks to entrepreneurs who search for new reserves of the resource would encourage exploration and extraction, leading to an increase in consumption. Government macroeconomic policies that lower the interest rate on bonds might stimulate economic growth, but there is no direct link to the consumption of exhaustible natural resources.

Which of the Following Is Most Likely to Reduce the Consumption