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: P_D1 = 100 - 0.4Q₁ P_D2 = 160 - 0.5Q₂

Supply schedules: P_S1 = 20 + 0.2Q₁ P_S2 = 60 + 0.3Q₂

Supply constraint: Q₁ + Q₂ = 200

Discount rate: 0.0595

Period one is now. Period two is twelve years in the future.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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