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Consider a two period dynamic model. Assume that the marginal benefit and marginal cost is the same across the two periods and the resource is
Consider a two period dynamic model. Assume that the marginal benefit and marginal cost is the same across the two periods and the resource is not scarce. Suppose that the discount rate is higher in the second version of the model. What effect would the higher discount rate in the second period have on the allocation between the two periods and the magnitude of the present value of the marginal user cost? Explain the intuition behind your results.
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