Tax law on the extraction of coal

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Reference no: EM133251970

The government of a country has passed a tax law on the extraction of coal, but this law will first take effect 5 years in the future.

a. Given that the coal mining is characterized by a constant marginal extraction cost (MEC) how would, if at all, this pending law affect the extraction profile over time in terms of both the timing of the extraction and the cumulative amount extracted. Why?

b. If the coal mining is characterized by an increasing MEC, how would your answer in (a) change, if at all. Why?

Give all questions of answers with details long explanation essy to understand.

Reference no: EM133251970

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