Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
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Chapter 6.2, Problem 2QQ
To determine

The impact of tax.

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1. The current price for a barrel of oil is $28. Assume the marginal extraction cost per barrel is $8 and the interest rate is 4 percent per year. a. According to the standard Hotelling model for a nonrenewable resource, what is the forecasted price for next year? b. How would your forecast change (qualitatively) if the demand for oil increased before next year?
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