Profits which are made from extracting resource are

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Reference no: EM13396255

Consider two countries, A and B, which have identical physical endowments of a key natural resource (such as oil or gold for example). In country A, any profits that are made from extracting the resource are confiscated by the government. In country B, there is no such risk. How do these conditions affect the:

a) Incentive to extract the resource in each country;

b) Incentive for investment in each country;

c) Economic growth and income of each country;

d) In which nation are people richer? Why?

Reference no: EM13396255

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