ABSTRACT
The efficient extraction profiles for depletable and renewable resources depend on the circumstances. In the standard treatments when the resource can be extracted at a constant marginal cost, the efficient quantity of the depletable resource extracted declines over time. The efficient allocation of an increasing marginal-cost resource is similar in that the quantity extracted declines over time, but differs with respect to the behavior of marginal user cost and the cumulative amount extracted. The presence of environmental costs is both empirically and conceptually important, since it forms one of the bridges between the traditionally separate fields of environmental economics and natural resource economics. A profit-maximizing producer attempts to balance present and future production in order to maximize the value of the resource and, hence, profits. Three separate concepts are used to classify the stock of depletable resources: current reserves, potential reserves, and resource endowment.
