Question

In: Economics

Assume the following two equations and the discount rate for the extraction of a natural resource:...

  1. Assume the following two equations and the discount rate for the extraction of a natural resource:
  1. P = 18 – 0.75 Q for Marginal Willingness to Pay
  2. P = 3 for a constant Marginal Cost
  3. Discount Rate = 6%

Solve for the following in a two time period setting:

  1. Find and label the equilibrium when there is no limit on Q. q=20
  2. Assume that there are only 25 units of the natural resource to be extracted, find the optimal extraction rates over the two periods. q1= 12.28 q2= 12.72
  3. Find the Total Marginal Net Benefits under the optimal extraction rates.
  4. Find the Marginal User Cost for each time period of the resource.

I don't understand #3 and #4 if you could provide step-by-step instructions/formulas for those.

Solutions

Expert Solution

Rahul Sunny answered 2 months ago
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