Question

In a multi-period mode, the progressive availability of a substitute resource is reflected as: 1. a...

In a multi-period mode, the progressive availability of a substitute resource is reflected as:

1. a decrease in the MUC

I dont get why MUC decreases if progresstive substitue is available, shouldnt it increase since cost of producing 1 more unit would be more expensive?
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Answer #1

MARGINAL USER COST (MUC) :-  Refers to the present value of the forgone future benefit that occurs as a result of making a small change in the amount of a resource used in the current period. When resources are scare, greater current uses dimnishes future opportunities

Rising marginal user cost reflects increasing scarcity of resources

In this question marginal user cost decreases when there is progressive availability of substitute because progressive substitute increases in future so that no scarcity occur...

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