Draw consumption and marginal cost time paths for a depletable resource with a stable demand and constant MC (this is the first model we drew in class) for each of the below descriptions. Illustrate how what is described differs from the optimal paths for the depletable, utilizing the same graph. (So, you'll have two lines on each time path model: one for the reference depletable, and one for what is described). This is an exercise called "comparative statics". а. Society expects a reasonable renewable perfect substitute with constant MC to become available in the future, where Choke Price > MCrenewable > M Caepletable· i. Show change in time paths ii. Do we still exhaust the resource?
Draw consumption and marginal cost time paths for a depletable resource with a stable demand and constant MC (this is the first model we drew in class) for each of the below descriptions. Illustrate how what is described differs from the optimal paths for the depletable, utilizing the same graph. (So, you'll have two lines on each time path model: one for the reference depletable, and one for what is described). This is an exercise called "comparative statics". а. Society expects a reasonable renewable perfect substitute with constant MC to become available in the future, where Choke Price > MCrenewable > M Caepletable· i. Show change in time paths ii. Do we still exhaust the resource?
Chapter2: Mathematics For Microeconomics
Section: Chapter Questions
Problem 2.6P
Related questions
Question
part a
![Draw consumption and marginal cost time paths for a depletable resource with a stable
demand and constant MC (this is the first model we drew in class) for each of the below
descriptions. Illustrate how what is described differs from the optimal paths for the depletable,
utilizing the same graph. (So, you'll have two lines on each time path model: one for the
reference depletable, and one for what is described). This is an exercise called "comparative
statics".
Society expects a reasonable renewable perfect substitute with
constant MC to become available in the future, where Choke Price >
MCrenewable > MCdepletable·
i. Show change in time paths
а.
ii. Do we still exhaust the resource?
b.
Consider TWO depletables, but one with a higher marginal costs. For
example, Choke Price > MCoil > M Cnatural gas:
i. Show change in time paths.
ii. Do we still exhaust the resource?
iii. Google: Is natural gas cleaner or dirtier to burn than oil? (cite sources APA
or Chicago style)
Explain why increasing marginal extraction costs are necessary to
produce a switch to a cleaner substitute before exhausting the depletable.
С.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8ea503b5-9839-4a05-b482-50f8a035eb54%2F4a399152-13d6-4b12-8bde-3202c0bda0f2%2Ftjgp5q_processed.png&w=3840&q=75)
Transcribed Image Text:Draw consumption and marginal cost time paths for a depletable resource with a stable
demand and constant MC (this is the first model we drew in class) for each of the below
descriptions. Illustrate how what is described differs from the optimal paths for the depletable,
utilizing the same graph. (So, you'll have two lines on each time path model: one for the
reference depletable, and one for what is described). This is an exercise called "comparative
statics".
Society expects a reasonable renewable perfect substitute with
constant MC to become available in the future, where Choke Price >
MCrenewable > MCdepletable·
i. Show change in time paths
а.
ii. Do we still exhaust the resource?
b.
Consider TWO depletables, but one with a higher marginal costs. For
example, Choke Price > MCoil > M Cnatural gas:
i. Show change in time paths.
ii. Do we still exhaust the resource?
iii. Google: Is natural gas cleaner or dirtier to burn than oil? (cite sources APA
or Chicago style)
Explain why increasing marginal extraction costs are necessary to
produce a switch to a cleaner substitute before exhausting the depletable.
С.
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