Question 3. (15 points) Suppose that the extraction of a non-renewable resource generates a negative externality. An
Fantastic news! We've Found the answer you've been seeking!
Question:
Question 3. (15 points)
Suppose that the extraction of a non-renewable resource generates a negative externality. An economist has estimated that the magnitude of the externality is $X per unit extracted and a unit tax is proposed to address this issue. Use the 4-quadrant Hotelling diagram to describe the resulting extraction path and price path if the externality was incorporated into the process. Does extraction of the resource happen quicker or take longer?
Posted Date: