Demand for copper from the Red Dog mine is steady over time, at p = 1000...

Demand for copper from the Red Dog mine is steady over time, at p = 1000 - q for both this year and next year (where p is the price in dollars per ton and q is the number of tons). Your marginal cost of mining and marketing copper is constant at $100 per ton, and your discount rate is r = 0.05. You can price like a monopolist but your available supply is only S = 600 tons that can be marketed this year and next.

A. Write the two conditions that you would use to solve for the specific quantities 0 q and 1 q that maximize your profits over the two periods. (You don’t actually have to solve for them.)

B. Using the information in part (a), develop an equation that explains how marginal net benefits in year 1 depend on marginal net benefits in year 0.

Expert Solution

Rahul Sunny answered 2 years ago

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