Chapter 6: Problem 1
To anticipate subsequent chapters where more complicated renewable resource models are introduced, consider a slight modification of the twoperiod depletable resource model. Suppose a biological resource is renewable in the sense that any of it left unextracted after Period 1 will grow at rate \(k\) Compared to the case where the total amount of a constant- \(M E C\) resource is fixed, how would the efficient allocation of this resource over the two periods differ? (Hint: It can be shown that \(M N B_{1} / M N B_{2}=(1+k) /(1+r),\) where \(M N B\) stands for marginal net benefit.
Short Answer
Step by step solution
Key Concepts
These are the key concepts you need to understand to accurately answer the question.