Environmental Economics 3. Construct a diagram that shows how a decrease in the interest rate will result in a lengthening ofthe time it takes to optimally exhaust a non-renewable resource. Explain the intuition for why this isthe case.

1. Theoretical Background: Hotelling's RuleIn resource economics, Hotelling's Rule provides a…

Answered: 3. Construct a diagram that shows how a…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter32: The Land Market And Natural Resources

Section: Chapter Questions

Problem 8E

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Consider two approaches to reducing emissions of CO2 into the environment from manufacturing industries in the United States. In the first approach, the U.S. government makes it a policy to use only predetermined technologies. In the second approach, the U.S. government determines which technologies are cleaner and subsidizes their use. Of the two approaches, which is the command-and-control policy?
What does a production possibilities frontier illustrate?
What is an example of a problem in the world today, not mentioned in the chapter, that has an economic dimension?
What arguments d0 low-income countries make in international discussions of global environmental clean-up?
What are three reasons to study economics?
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Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs. What is the optimal level of sewage for this city? Why not just pass a law that films can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.

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3. Construct a diagram that shows how a decrease in the interest rate will result in a lengthening of the time it takes to optimally exhaust a non-renewable resource. Explain the intuition for why this is the case.