Basic Econimics Final Exam

If I taught an economics class the following problem would be on the final exam. You would have to answer it correctly to pass the class. Of course if you took a class from me and were paying attention you would know the answer. Here is the question:

In a free market system, if there are 325 billion barrels of oil reserves in the world, and we are currently using oil at a rate of 100,000 barrels week. When will we run out of oil? Assume no new oil reserves are found and all known reserves are recoverable.

If you answered, “Never” you correctly answered the question. Any other answer would be wrong. As oil became scarce, the price would go up. This would drive consumers to find alternatives to using oil. When the oil became even more scarce, the price would go up higher. This in turn would further change behaviors and we would consume less oil. The price would keep going up and up, and we would continue to consume less and less. If we maintained free markets we would never run out.