Question

The costs to return land or other property to its original condition after extracting natural resources are referred to as?

1) exploration costs
2) acquisition costs
3) restoration costs
4) development costs

Answer 1

Restoration costs are necessary expenditures to return land to its original state after resource extraction, with optimal restoration determined through marginal analysis at the point where marginal benefits equal marginal costs.

Step-by-step explanation:

The costs to return land or other property to its original condition after extracting natural resources are referred to as restoration costs. In the context of the state of Colorado's policy on fracking, companies are required to restore the land after oil and gas extractions. This process involves analyzing the total costs and total benefits of restoration as demonstrated in their given table. Marginal analysis can assist in determining the optimal amount of land to be restored, which is the point where the marginal benefits equal the marginal costs. Based on the provided information, the optimal amount of restored land is indicated as 300 acres, as beyond this point, the marginal costs exceed the marginal benefits. Understanding these financial implications is essential in making informed decisions regarding land use and environmental conservation.