1. If we take the world's known reserves of oil, and divide this total quantity by averageannual oil consumption, we obtain the "reserves-to-use ratio," the number of yearsthat remain before exhaustion of our oil resources. Explain why this ratio paints amisleading picture of oil scarcity.

2. The Hotelling Rule states that marginal user cost rises at the rate of interest.

3. If interest rates were to fall unexpectedly, what would you expect to happen to theprice of a nonrenewable resource like oil? What would happen to the rate of priceincreases going forward?

4. Oil and endangered species are both natural resources with high economic value.Yet a private landowner in the United States might react very differently to thediscovery of an oil well on her property than she would to the discovery of anendangered species population. Explain with using economic concepts.

5. Economist Robert Solow has said that "the monopolist is the conservationist'sfriend." Explain this with using nonrenewable resource extraction.