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Figures 7.1 and 7.2 represent a case where the backstop (marginal = average) production cost is a constant, b. For this question, suppose instead that
Figures 7.1 and 7.2 represent a case where the backstop (marginal = average) production cost is a constant, b. For this question, suppose instead that the backstop cost equals 1 2 bz2, so the marginal cost of the backstop equals bz (instead of being constant at b). As before, average extraction cost of non-renewable resource is constant at C
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