Your mother is a mother coal mine owner with a benevolent streak. Someday you will take on the business. In an effort to train you, your mother has given you one coal mine. You will use it to extract coal this yer (present day) and again next year (one year from now). You must demonstrate your ability to extract coal in the social welfare maximizing way. The demand for coal is PD = 100-0.6qi. The supply of coal can be expressed as Ps=40+0.4qi. The discount rate for the second year is 3% a) the mine has a total of 140 tons of coal available, what quantity will you choose to extract in each period? That is what is q for each period? what are the corresponding prices for each period? b) It is realized that the mine has only 35 tons of coal available. Graph the present value of marginal net benefit curves for periods 1
1. Your mother is a mother coal mine owner with a benevolent streak. Someday you will take on the business. In an effort to train you, your mother has given you one coal mine. You will use it to extract coal this yer (present day) and again next year (one year from now). You must demonstrate your ability to extract coal in the social welfare maximizing way. The
a) the mine has a total of 140 tons of coal available, what quantity will you choose to extract in each period? That is what is q for each period? what are the corresponding prices for each period?
b) It is realized that the mine has only 35 tons of coal available. Graph the present value of marginal net benefit
c) What is the Marginal use cost of the coal for period 1 when only 35 tons are available? is it efficiently extracted across the two periods.
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