Question

1. Suppose that a limited supply of coal is available to be extracted and allocated as fuel over two time periods by a social planner. Assume that the marginal benefits from coal are given by MB₁ = 40 – 2_q1 and MB₂ = 40 – 2_q2 where q₁ and q₂ denote the respective amounts utilized in periods 1 and 2. The marginal cost of extracting coal is MC = 4 in both time periods. The total amount of coal available, X , is 10 units and the rate of discount is 40% (i.e., r = 0.4).
2. 1. Compute the socially desirable values of coal use and associated marginal benefits in each time period.   
3. 2. Explain the concept of marginal user cost (MUC) of coal and compute its value in each time period.   
4. 3. In which directions would you expect the socially desirable values of utilization and MUC of coal in each time period to change if the discount rate, r, increased?

Answer 1

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Posted On: 18 JUN 2020 5:23PM by PIB Delhi

Prime Minister Shri Narendra Modi launched the auction process of 41 coal blocks for commercial mining through video conference here today. It was part of the series of announcements made by the Government of India, under the AatmaNirbhar Bharat Abhiyan. The Coal Ministry in association with FICCI launched the process for auction of these coal mines. A two stage electronic auction process is being adopted for allocation of the coal mines.

Speaking on the occasion, Shri Narendra Modi said that India will overcome the COVID -19 Pandemic and the nation will turn this crisis into an opportunity. He said that this crisis has taught India the lesson of becoming AatmaNirbhar, i.e. Self-Reliant. He said an AatmaNirbhar Bharat means reducing dependency on imports, and saving foreign currency on imports. It entails that India develop resources domestically so that the country does not have to rely on imports. It also means becoming the biggest exporters of the commodities that we now import.