Consider the following two-period model of dynamically efficient extraction of a non-renewable natural resource. The constant social marginal cost of extraction is 40 in each period and the total stock of the resource is Q = 300 units. Moreover, the social marginal beneÖt is MB(Qt) = 200 Qt, where Qt is the quantity of resource extracted in period t, for t = 0; 1. The discount factor is 0:8. (a) What is the efficient quantity of resources extracted in each period? Provide a graphical representation of the solution. (b) What is the marginal user cost (or scarcity rent) of the resource in each period?
Consider the following two-period model of dynamically efficient extraction of a non-renewable natural resource. The constant social marginal cost of extraction is 40 in each period and the total stock of the resource is Q = 300 units. Moreover, the social marginal beneÖt is MB(Qt) = 200 Qt, where Qt is the quantity of resource extracted in period t, for t = 0; 1. The discount factor is 0:8. (a) What is the efficient quantity of resources extracted in each period? Provide a graphical representation of the solution. (b) What is the marginal user cost (or scarcity rent) of the resource in each period?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section: Chapter Questions
Problem 17SQ
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Consider the following two-period model of dynamically efficient extraction of a non-renewable natural resource. The constant
(a) What is the efficient quantity of resources extracted in each period? Provide a graphical representation of the solution.
(b) What is the marginal user cost (or scarcity rent) of the resource in each period?
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