deposits of differing quality.
An intermediate sort of exhaustibility involves running out of a low-cost source of,say,oil (e.g. in shallow pools) and having to move on to a higher-cost source (e.g. off shore pools or shale) One can view the high-cost phase as a competitive industry equilibrium,which we have examined above, with another competitive industry phase grafted on as an earlier phase. Industry supply comes from the low-cost source in the first phase, and then there is a switch to a phase of extraction from the high-cost source. In phase 1 each small extractor has unit extraction costs C1, and in phase 2 each small extractor has unit costs C2 with C2 greater than C1 The supply responese is familiar-quantity paths are the outcome of rent,p(t)-C1, rising at r percent in each phase.