Question 8: A government, whose goal is to conserve (reduce its use of) its natu

Question

Question 8: A government, whose goal is to conserve (reduce its use of) its natural resources (e.g., oil), should: A. Allow just a single company to extract the natural resource Allow only a few companies (e.g., two or three) to extract the natural resource C Allow several dozens of companies to extract the natural resource D. Not care at all about the number of companies extracting the natural resource: the number of companies operating makes no difference to determining how soon the resource may be fully extracted

Explanation / Answer

A government, whose goal is to conserve (reduce its use of) its natural resources should allow several dozens of companies to extract the natural resources. So the correct option is C. This is because if government allows only two three companies then they will be having monopoly in providing products form these companies. But if government allows dozens of companies to extract the resources and also encourage them to competete with each other for efficient and green extraction and production will help the economy in lot of ways. The negative externality will decrease with this decision of governments and also consumers will have broader choices while consuming resources.

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