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Consider the general effect of the discount rate on the dynamic, efficient allocation of a depletable resource across time. Suppose that the two versions two-period
Consider the general effect of the discount rate on the dynamic, efficient allocation of a depletable resource across time. Suppose that the two versions two-period model (discussed in the lectures) are identical, except that the first version involves a lower discount rate than the second version. What effect would the different discount rates among the version have on the allocation between the two periods and the magnitude of the present value of the marginal user cost ? (at least 600 words)
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