Suppose a fossil fuel has stable demand and a constant marginal cost. There are only two periods. MB = 8 – 0.4q; and MC = 2. Suppose there are only 20 units of the resource and the discount rate is r = 0.10. Solve for the dynamic optimum across periods. Show your mathematical solution, but also depict it graphically (ACCURACY COUNTS) using the double-vertical axes model from class. %3D %3D
Suppose a fossil fuel has stable demand and a constant marginal cost. There are only two periods. MB = 8 – 0.4q; and MC = 2. Suppose there are only 20 units of the resource and the discount rate is r = 0.10. Solve for the dynamic optimum across periods. Show your mathematical solution, but also depict it graphically (ACCURACY COUNTS) using the double-vertical axes model from class. %3D %3D
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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