None Suppose that there is a nonrenewable resource that can be consumed today (period 1) or tomorrow (period 2) and that it has a fixed supply of 2 units.Assume that the inverse demand for the resource in each period is given by:P₁ =25-50₁P2-25-502Moreover, assume that the resource's marginal extraction cost (MEC) is constant in both periods at $5 and that the social discount rate is 10% (i.e.,r=0.10).Assuming that the resource is efficiently allocated, what are the net benefits in period 1?When calculating intermediate values (i.e., things like prices and quantities that are not your final answer, which is consumer surplus in this problem),please round them to two decimal places. And as always, please round your final answer to two decimal places as well. That is, you may round valuesbesides your final answer in this problem while working towards finding your final answer.Answer:

Answers: Given:Inverse demand equation in period 1: P₁ = 25 - 50Q₁Inverse demand equation in period…

Answered: Suppose that there is a nonrenewable…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the inverse demand function for a depletable resource is linear, P = 25 – 0.4q, and the marginal supply cost is constant at £5.i. If 40 units are to be allocated between two periods in a dynamic efficient allocation, how much would be allocated to period 1 and how much to period 2 when the discount rate is r = 0.15? Show your working ii. What is the marginal user cost in each period? Provide a one-sentence economic interpretation iii. Show in a diagram how the marginal user cost would change if an energy price shock were to raise the marginal cost in period 2 to £10
QUESTION 22 Suppose again that a market demand schedule for a resource is P = 200 - 4Q and the market supply schedule is P = denoted as t=1. The marginal user cost (MUC) is negative at the intertemporal (i.e., dynamic) equilibrium when r= 0.10. Is it true or false? 80 + 2Q. There are two periods only, current period, denoted as t=0, and second, True False QUESTION 2 Suppose once again that a market demand schedule for a resource is P = 200 - 4Q and the market supply schedule is P = second, denoted as t=1. What is the Total User Cost (TUC) at the intertemporal equilibrium when r = 0.10? 80 + 2Q. There are two periods only, current period, denoted as t-0, and O A. TUC = $120.0 %3D O B. TUC = $74.83 OC. TUC = $28.50 O D. TUC = $0.00 %3D %3D
The demand function for a depletable resource is p = 10 – Q while the extraction costs are C = 2Q. There is a fixed supply of 10 units that can be allocated between 2 periods. (a) Assume that the discount rate is zero. What is the dynamically efficient allocation in period 1 and 2? (b) What would be the competitive market allocation? (c) Explain in plain-English terms why the two allocations, in (a) and (b), are different.
1. Suppose the inverse demand function for the depletable resource is given by P = 8 – 0.49 And the marginal cost of supplying it is 2 (This is the marginal cost of extraction). a) If 20 units are to be allocated between the two periods, in a dynamic efficient allocation how much would be allocated to the first period and how much to the second period when the discount rate is zero. b) Given this discount rate, what would be the efficient price in the two periods. c) What would be the marginal use cost in each period?
Suppose we alocate a foxed supply of a depletable resource between two periods in a dynamically efficient way. Assume further that the demand function is constant in the two periods and the marginal willingness to pay is given by the formula P= 7-0.46q while the marginal cost is constant at $1 per unit. The total supply ls 18 units and the discount rate is 2%. What is the marginal user cost during the first period?
QUESTION 3 Assume that we have a fixed supply of a depletable resource to allocate between two periods. Assume further that the demand function is constant in the two periods, the marginal willingness to pay is given by the formula P = 14 - 0.3q, and marginal cost is constant at $2 per unit. The total supply is 2 units. What percent of the total should be consumed during the first period if the discount rate is 1%?
Y7 1- One Suppose P=8-0.2q in each of the two periods MC in each of the two periods =$4 Supply of the resource is 20 units a)Calculate the Dynamically efficient allocation of this depleted resource over the two periods if the discount rate is 10% b)Calculate marginal user cost in each period 2- Consider the inverse demand functions for two users of water A and B User A P=8-0.2 qA User B P=8-0.2 qB If the marginal cost of providing water is constant and equal to $2 and the supply of water is equal to 30 units, solve for the statically efficient allocation of water among the two users
The market for gravel has the following demand and supply relationships: Supply function: Q = 100P - 1,000 Inverse demand function: P = 50 - 0.01*Q + PX, where P represents price of gravel per ton in dollars, Q represents sales of gravel per week in tons, and PX is the price of some other product X in dollars per unit. Let PX = $50/ton In a diagram, qualitatively describe the change that would occur in the market for gravel (i.e. equilibrium price and quantity) if a new discovery has just made the production of product X cheaper. Briefly explain whether it is a movement along or shift of demand curve and supply curve for gravel. In addition to the new discovery regarding product X in previous question), suppose now workers producing gravel ask for sick leave due to COVID. Use supply and demand analysis to predict how these two shocks will affect equilibrium price and sales. Illustrate your results in a diagram. Is there enough information to determine if market prices will rise or…
Suppose a depletable natural resource has no substitute. The resource can be extracted from the ground at a constant marginal cost. Furthermore, the marginal willingness to pay exceeds the marginal cost for the initial quantities of the resource, so it is worth extracting at least some of the resource. In a dynamically efficient allocation over many periods, when will most of the resource be extracted (earlier periods or later periods)? Why? At what point will the resource run out? Will the resource run out abruptly or smoothly? Why?
a) The supply and demand functions of a good are given by: P = 30 + Qs 2 P = 126 – Qd 2 where P, QS and Qd denote the price, quantity supplied and quantity demanded, respectively. Calculate the producer's and consumer's surpluses at the equilibrium point. b) An investment flow is I(t) = 700/t where t is measured in years. Calculate the total capital formation during the first three years.
The demand function for a car manufacturing firm is presented as follows:- Q=−500P+210Px+200P+20pop-1,000,000i+600A Where, Q =Demand for firm′s car; P = Price of Domestic Manufacturers; PX = Price of New Luxury Cars; I = Disposable Income per Household; Pop = Population; I = Interest Rates; A = Advertising Campaign Explain the extent to which demand changes when any of the independent variables changes.
- Suppose that we need to develop a model to help us to allocate a resource between two time periods: Period 1 and Period 2. Demand can be characterized in both periods as: P = 20-2Q. In both periods the marginal cost of extracting the resource is constant at $4 per unit. The total quantity of the resource that is available to allocate between the two periods is 18 units (in other words, Q1 + Q2 <= 18). Assume that the discount rate is 5%. What is the marginal user cost? a) 0; b) 0.76; c) -2; d) 1.9 Shark

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