If, for the last unit of a resource extracted in each period, the marginal benefit equals...
If, for the last unit of a resource extracted in each period, the marginal benefit equals total marginal cost then . . .
A)The allocation is efficient but may not sustainable
B)The allocation is both efficient and sustainable
C) The allocation is both efficient but only weakly sustainable
D) The allocation may not be either sustainable or or efficient
Homework Answers
Total Marginal cost is including private marginal cost of extraction plus external cost on future generations .
So ,if MB=TMC,then the produced QUANTITY is allocative efficient and also sustainable.because it is taking into consideration the cost on future generations of current resource extraction.so it will be sustainable.
Because In every next period, the cost on future generations will increase but it is including the increased cost ,so it will be sustainable.
If In next period it will only take account of same external cost then it will be weakly sustainable.
So OPTION b is right
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