Refer to Figure 1.4, where factor substitution possibility between human-made capital (M) and natural capital (N) was discussed using the New York water-filtration project as a case study. Try to make a similar analysis assuming that Q, represents the total amount of carbon dioxide (CO2) emissions that needs to be controlled, and M and N represent CO, emission control by technological means, and carbon sequestration through the preservation of forest ecosystem, respectively. In your analysis make sure you discuss the following issues: factor substitution possibilities, the limit to factor substitution possibilities, and the effect of technological advances on factor substitution.

Figure 1.4

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Human-made Capital M, M N N Q Natural Capital