Assume you have a limited stock of copper in a mine of 30 units. You want...

Assume you have a limited stock of copper in a mine of 30 units. You want to know how many units to extract this year (Q1) and how many to extract next year (Q2). The slope of the marginal benefit curve is: MB: y = -0.4Q + 12 and the slope of the marginal cost curve is: MC: y = 4 Use the formula PV(MB1 - MC1) = PV(MB2 - MC2) to calculate how many units of copper to extract this year and next year. The discount rate (r) is 9% (0.09). Report the optimal units of copper to extract this year (Q1), rounded to two (2) decimal places (XX.XX).

Expert Solution

15.21 units of copper will be extracted this year and 14.79 units of copper will be extracted next year

Rahul Sunny answered 2 years ago

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