Discuss the conditions under which a mining firm can realise maximum present value of its
rent ‘while extracting with constant marginal cost’?
Answers
Answered by
8
Answer:
Following are the conditions required for mining:
Expedient in the interest of regulation of mines and mineral development.
For preservation of natural environment,
To control of floods.
Prevention of pollution,
To avoid danger to public health.
Communication.
Monuments or other structures
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The process of mining and extracting of resources like minerals and other materials account for major part of the GDP of the country and are capable of generating a lot resource rent with constant marginal costings.
Explanation:
- The mining firm can realize the maximum present value of its rent while extracting is because the natural resources are scarce, there is an economic return to the resources itself.
- The returns needs to take care of the intermediate input costs, labor costs, and the opportunity cost of capital invested in the business.
- The income attributed to the scarcity of the resources is relative to demand for the resource in the market. Therefore from an economic perspective the sustainable and equitable management of these resources can helps with realizing the maximum value of its rent with constant marginal costs.
To know more about marginal costs
Meaning and importance of marginal cost and marginal costing
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