1.Explain in words the concept of "marginal user cost" and how it is related to scarcity of an exhaustible resource. In what way might this be an "externality"? How is marginal user cost related to "mineral royalties."In the U.S. are the levels of mineral royalties set according to economists' careful calculations of the marginal user cost associated with each unit of extraction?Explain.

2.Does dynamically efficient intertemporal allocation of an exhaustible mineral result in sustainable exploitation of that mineral?Why or why not?Explain.

3.Travel Cost Models:The lecture slides provide a brief introduction to some of the methods that economists can use, in some circumstances, to measure the demand (willingness to pay) for non-market environmental goods.Our models for allocation of non-market environmental goods and natural resources cannot always rely on market data to infer demand.Travel cost models for environmental valuation involve "revealed preferences" (i.e. proof of demand in the form of actual money being paid out) via households' actual decisions to incur the extra costs of traveling a little farther in order to consume more of some environmental good that is a key feature of the alternative destinations they are considering. Explain why we do not simply rely upon travel cost methods to value all non-market environmental commodities, ecosystem services, or natural resources.