Question 1 Green Paradox (20 points) There are two scenarios: Alpha and Bravo. They have identical demand functions, initial resource stocks, and extraction cost functions. The difference is the availability of a backstop. In Alpha, a backstop with constant MC is available immediately (at time t = 0}. In Bravo, we know now (t = 0) that a backstop with constant MC (identical to Alpha's]: will become available at time t : 25. A. (5 points] Suppose that in Scenario Alpha, the backstop begins to be used at time t = 25 {i.e., not immediately even though it is available now). What, if any, is the difference in extraction trajectories in the two scenarios? Explain your answer briey. (5 points] Does the availability of the backstop result in a Green Paradox? Explain. C. (10 points) Scenario Charlie involves uncertainty; the time at which the backstop will become avail- able is a random variable with expected value t : 25. The time of availability might be smaller or larger than t = 25. Compare the equilibrium in Scenario Charlie with those in Scenarios Alpha and Bravo and justify your conjectures. F'J