Posted: March 6th, 2017

What would be the efficient price in the two periods? (c) What would be the marginal user cost in each period?

In the numerical example given in
the text, the inverse demand function for the depletable resource is P = 8 –
0.4q and the marginal cost of supplying it is $4. (a) If 40 units are to be
allocated between two periods, in a dynamic efficient allocation how much would
be allocated to the first period and how much to the second when the discount
rate is zero? (b) What would be the efficient price in the two periods? (c) What
would be the marginal user cost in each period? Submit your answers, showing all
work, to the assignment dropbox.