Question

Discuss the effects of the following on the optimal extraction path and depletion year of a depletable natural resources

1) A monopoly power

2) Advances in resource exploration technologies

3) Advances in extraction technologies

Please indicate your answers clearly to show which sub-question they are applicable to. You can draw graphs on a paper and upload their pictures if you find this important to illustrate your explanations

Answer 1

1. If the firm exhibit monopoly power then the firm will have full control over the resources. This will lead to over-exploitation of resources by the firms. The extraction of resources will not be optimal in the case of monopoly. The natural resource will be depleted at a more faster rate.

2. When there is advancement in the technologies to explore resource, then the rate of exploitation also becomes faster. There will be over-exploitation of resources and the resources will not be extracted optimally. The rate of exploitation will also be faster and the depletion year will also come faster.

3. The advancement in extraction technologies will also increase the rate of exploitation. The year of depletion will also come faster.