Suppose the supply and demand of land for natural gas extraction are imperfectly elastic. Given that coal is a potential substitute for natural gas in energy applications, a change in the price of coal may shift the demand curve for natural gas.
What happens to the economic rents assigned to land on which natural gas is extracted if the price of coal declines? A) Rents increase
B) Rents are positive and remain unchanged
C) Rents decrease
D) Rents are zero before and after the change
Question 2
Transferable permits allow emission reduction to be achieved
A) without any impact on the industrial sector, just as a standard would.
B) without any impact on the industrial sector, just as fees would.
C) at the lowest possible cost.
D) with firms monitoring each other, rather than having the government do the monitoring.
E) Both C and D are true.
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