Optimal extraction rate. Suppose that the capital-output ratio is constant and that the real interest rate takes
Question:
Optimal extraction rate. Suppose that the capital-output ratio is constant and that the real interest rate takes the constant value r. Using the energy model in Section 10.1, solve for the constant rate of extraction s*E that maximizes the present discounted value of output per worker. Explain and interpret your result. (Hint: notice that output per worker grows at a constant rate, so that this present value is relatively easy to compute. Assume r is suffi ciently large.)
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Introduction To Economic Growth
ISBN: 9780393919172
3rd Edition
Authors: Charles I. Jones, Dietrich Vollrath
Question Posted: