The inverse aggregate demand for energy is given by pt = 15 - wt, where wt = zt+Yt, zt is supply of the backstop, and Yt is supply of a non-renewable resource. z and y are perfect substitutes. Marginal extraction cost of y is constant at C = 2, and the initial stock is x0 > 0. Can there be an initial phase during which the non-renewable resource supplies the entire market, if the marginal production cost of the backstop is given by MC(zt) = 17

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Okay lets think through this stepbystep The inverse demand function is pt 15 wt wt zt Yt zt i... View the full answer