1. Suppose you have an offer of $200,000 to sell your house this year. The market rate of interest is 10%. You expect to be able to sell your house next year for $230,000.
How does this relate to the theory of nonrenewable resource allocation over time?
a. It does not relate because the housing market is not natural
b. To make a selling decision we take into account the discounted present value and the expected selling price
c. Because houses are set in land it is expected that they behave like a natural resource
d. Houses can be renewed so this example does not relate
2. Suppose you have an offer of $200,000 to sell your house this year. The market rate of interest is 10%. You expect to be able to sell your house next year for $230,000.
In particular, what does it tell you about how prices must behave in a market for nonrenewable resource?
a. Prices in the market for nonrenewable resources follow hotelling's rule, meaning prices should rise at the rate of interest
b. As stated in the previous question, these examples are not related
c. We should preserve natural resources at all cost
d. We should use the nonrenewable resources since we will leave more capital goods for future generations.