Many states are now imposing severance taxes on resources being extracted within their borders. How is the consumption path of depletable resources with severance taxes imposed compared to the case without taxes? Assuming an increasing marginal extraction cost of depletable resources over time. A. For the same time period, consumption for depletable resource decreases due to the imposition of severance taxes. B. For the same time period, consumption for depletable resource increases due to the imposition of severance taxes. C. For the same time period, consumption for depletable resource stays the same regardless to the imposition of severance taxes.

Question

Please answer questions 2, 3, and 4.

2. Many states are now imposing severance taxes on resources being extracted within their borders. How is the consumption path of depletable resources with severance taxes imposed compared to the case without taxes? Assuming an increasing marginal extraction cost of depletable resources over time.

A. For the same time period, consumption for depletable resource decreases due to the imposition of severance taxes.

B. For the same time period, consumption for depletable resource increases due to the imposition of severance taxes.

C. For the same time period, consumption for depletable resource stays the same regardless to the imposition of severance taxes.

3. Suppose there exists a renewable energy substitute for depletable resources with an increasing marginal extraction cost. How would per-unit subsidy on renewable energy change price path for renewable energy?

A. Price for renewable energy with subsidy is higher than the case without subsidy.

B. Price for renewable energy with subsidy is lower than the case without subsidy.

C. Price for renewable energy with subsidy is stays the same with the case without subsidy.

4. Suppose there exists a renewable energy substitute for depletable resources with an increasing marginal extraction cost. How would per-unit subsidy on renewable energy change the switch point from depletable resources to renewable energy?

A. Both demand and supply side effects tend to slow down the time when a switch to the renewable resource is made, all other things being equal.

B. Both demand and supply side effects tend to hasten the time when a switch to the renewable resource is made, all other things being equal.

C. Both demand and supply side effects tend to affect the time when a switch to the renewable resource is made, all other things being equal.