3. Assume that there is a resource that can be consumed in 2 periods, now and...

3. Assume that there is a resource that can be consumed in 2 periods, now and the future. In the two-period scenario, suppose the marginal benefit curve for each period is given by the equation y = 100 – 2x. (10 points)

3.a. What is the optimal consumption level in each period if the total quantity is 100? Explain.

3.b. What is the dynamically efficient allocation in each period if the total quantity is 60 and the discount rate is zero?

Expert Solution

-----
Please leave an upvote if this helped!

Rahul Sunny answered 2 years ago

Suppose a nonrenewable resource can be extracted over two periods. Both periods are characterized by MB...

Suppose a nonrenewable resource can be extracted over two periods. Both periods are characterized by MB = 250 - .25Q and MC = 50 + .25Q and there are 350 units total available for extraction. Assume the discount rate is .15 (or 15%). Identify the socially optimal rates of extraction for period 1 and period 2. Identify and define the user cost associated with the extraction of this resource. Identify the socially optimal price of the resource for period 1...

Consider 3 time periods (now, a bit later, a lot later). The “Now” period: If a student...

Consider 3 time periods (now, a bit later, a lot later). The “Now” period: If a student goes to school now, they will have to pay $100 for books/transportation/fees/etc. In addition, they will not be able to work, hence the family income is reduced by $600. The “a bit later” period: If a person goes to school in the “now” period, they will earn $500 more than a person who does not go to school. The “a lot later” period: If a person goes...

Assume that there are 50 units of an exhaustible resource that can be used in either...

Assume that there are 50 units of an exhaustible resource that can be used in either period 1 or period 2. The demand curve is given by: P=100-Q. The interest rate is 50%. The industry is perfectly competitive. There are no costs of extraction. a) Solve for the efficient level of output and price in period 1 and period 2 b) Suppose that the government imposes a tax of $30 per unit. Solve for the level of output and price...

Assume a consumer lives for two periods. His income and consumption in the two periods are...

Assume a consumer lives for two periods. His income and consumption in the two periods are Y1 and C1, and Y2 and C2 respectively. Ignore price level changes and further assume that this consumer saves income (S) in the first period and this saving earns interest. With consumption in two periods being constrained by income in the two periods derive the intertemporal budget constraint.

A patent monopolist faces a demand curve: P=10-1/3 Q and total cost F+2Q+2/3 Q^2 Now assume...

A patent monopolist faces a demand curve: P=10-1/3 Q and total cost F+2Q+2/3 Q^2 Now assume that the patent monopolist splits production between two factories, and that F is zero. i. How much will each factory produce? What is the price? What is short run profit? What is the increase in short run profit from using 2 factories instead of one? ii. Draw a graph to illustrate this case. Carefully indicate on the graph the total surplus generated,...

Practice Question 2.) Assume that the inverse demand function for the depletable resource is P=10-0.4q. Assume...

Practice Question 2.) Assume that the inverse demand function for the depletable resource is P=10-0.4q. Assume the same demand conditions for both periods. The first scenario is where there are 30 units of a depletable good that needs to be allocated between two periods. The marginal cost of extraction is $4. a. Calculate the static efficient allocation for Period 1 and Period 2. b. Calculate the society’s present value of net benefits for both periods. Assume the discount rate is...

3-Sue now has $3,315. How much would she have after 9 years if she leaves it invested at 7.34% with compounding periods 2?

3-Sue now has $3,315. How much would she have after 9 years if she leaves it invested at 7.34% with compounding periods 2? 5-You want to have $5,500 in five years with an account that yields 6% annually. You deposit $4,000 with the institution offering the account. Will you meet your goal? A)Yes, because the rate of return over the 5 years is 7.5% B)No, because the present value of $5,500 at 6% annually for 5 years is $4,059.75...

Question 2 ) Begin with the economy at full employment. Now assume that there is a...

Question 2 ) Begin with the economy at full employment. Now assume that there is a decrease in Government purchases of goods and services. Analyze verbally the differing effects of this decrease in G in a i) Classical model and in a ii) fixed nominal wage Keynesian Model. Analyze what will be the effects on labor supply, labor demand, the level of unemployment, the level of prices, and the level of output? Show the effect in the labor market, the...

Assume the representative consumer lives in two periods and his preferences can be described by U(c,...

Assume the representative consumer lives in two periods and his preferences can be described by U(c, c')=c^(1/2)+β(c')^(1/2) where c is the current consumption, c' is next period consumption, and β = 0.95. Let’s assume that the consumer can borrow or lend at the interest rate r = 10%. The consumer receives an income y = 100 in the current period and y' = 110 in the next period. The government wants to spend G = 30 in the current period...

Determine the optimal dynamic allocation of a nonrenewable resource across two time periods based on the...

Determine the optimal dynamic allocation of a nonrenewable resource across two time periods based on the information provided. Your answer should include: MNB1 MNB2 PV(MNB2) The optimal quantity of consumption in period one The optimal quantity of consumption in period two, and a detailed presentation of HOW you derived your answers. Period One Period Two Demand schedules: PD1 = 100 - 0.4Q1 PD2 = 160 - 0.5Q2 Supply schedules: PS1 = 20 + 0.2Q1 PS2 =...

Question