Suppose there are two kinds of oil left, underground oil and shale oil. The cost of extracting a unit of underground oil is $2/barrel, of shale oil $10/barrel. Once extracted from the earth, the two kinds of oil are identical. Explain, in terms a non-economist could understand, why it does not make sense to begin using the shale oil until all the underground oil has been exhausted.
Answer to relevant QuestionsSuppose a certain species of tree grows according to the function B = 20√t, where B is the volume of lumber in the tree, measured in board-feet, and t is the tree’s age in years. If the interest rate is 0.05, at what age ...Smith and Jones are trying to decide whether to share an apartment. To live separately, each would have to pay $300/mo in rent. An apartment large enough to share can be rented for $450/mo. Costs aside, they are indifferent ...Suppose Smith owns and works in a bakery located next to an outdoor cafe owned by Jones. The patrons of the outdoor cafe like the smell that emanates from the bakery. When Smith leaves his windows open, the cafe faces the ...Why might voters in a country choose a non-Pareto-optimal allocation over another that is Pareto optimal?If Crusoe and Friday regard food and clothing as perfect 1-for-1 substitutes, what should each produce?
Post your question