Assignment Task: Optimal allocation of resource over N periods a. Suppose the government know the initial marginal user cost (MUC) for coal. Using the four - quadrant diagram, illustrate and explain a dynamically efficient extraction path for this resource assuming a constant marginal cost of extraction.
A. How does MUC increases and how this feed in the optimal coal - mining program.
B. Show and explain what happens when there is a renewable substitute such as natural gas that can come online? You may compare and contrast the extraction profile of having a natural gas substitute to coal only