2. Your country is considering how to allocate cobalt, a non-renewable natural resource. The per period demand curve is: P = 120 - 2q The marginal cost of extraction is 20. There is a total supply of cobalt (Q) is 80. a. [5 points] What is the static efficient level of extraction in each period? b. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 0? c. [5 points] Graph the dynamically efficient level of extraction in each period with the quantity of resource on the horizontal, period 1 net benefits on the left and period 2 net benefits on the right-hand axis. d. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 20%? e. [20 points] Imagine that this was a three-period model. What would the dynamically efficient outcome be with a discount rate of 20%? I

2. Your country is considering how to allocate cobalt, a non-renewable natural resource. The per period demand curve is: P = 120 - 2q The marginal cost of extraction is 20. There is a total supply of cobalt (Q) is 80. a. [5 points] What is the static efficient level of extraction in each period? b. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 0? c. [5 points] Graph the dynamically efficient level of extraction in each period with the quantity of resource on the horizontal, period 1 net benefits on the left and period 2 net benefits on the right-hand axis. d. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 20%? e. [20 points] Imagine that this was a three-period model. What would the dynamically efficient outcome be with a discount rate of 20%? I

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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