Microeconomics: Principles, Problems, & Policies, 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0077660811
ISBN 13: 978-0-07766-081-9

Chapter 17 - Natural Resource and Energy Economics - Discussion Questions - Page 402: 7

Answer

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Work Step by Step

Firms are clever in that they will change what energy they extract and what rate they extract it at based on current prices. After all, if the price of oil is low, it makes a lot more sense to pursue other endeavors as opposed to drilling for oil. When prices increase, companies can make more money by drilling oil, making it a more compelling option.
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