If resource extraction companies can benefit from both present and future extraction, they will limit current extraction to only those units which are more profitable to extract in the present rather than in the future.

Question

Quizplus · Accepted Answer

Resource extraction companies often engage in intertemporal decision-making, balancing the profitability of extracting resources now versus in the future. By limiting current extraction to units more profitable to extract presently, they can maximize their overall profits while ensuring sustainable resource availability for future extraction opportunities. This approach aligns with the economic principle of maximizing net present value, taking into account the time value of money and the potential for resource depletion or price changes.

If Resource Extraction Companies Can Benefit from Both Present and Future