Answer both questions 2. Suppose a particular stretch of river can be used to build a hydropower dam that generates Q Kilowatt-hours (MWh) of electricity. The electricity price is 1.44 per Kilowatt-hour. The opportunity cost of producing power is C = $0.0007 x Q2 per hour. The opportunity cost of the dam is due to the foregone net benefit that would have resulted from recreation activity related to the river. What is the net benefit of the dam if the dam has optimal size? 3. Assume that the society should decide on how to allocate 24 units of depletable resource between two periods (period 1 and period 2). Benefit and cost of extracting qi units of depletable resource in period i = 1,2 are Bi = 127qi – 2qi2 and Ci = 17qi respectively. How much should the society extract in period 1 if the discount rate is 2%?
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Answer both questions
2. Suppose a particular stretch of river can be used to build a hydropower dam that generates Q Kilowatt-hours (MWh) of electricity. The electricity price is 1.44 per Kilowatt-hour. The
3. Assume that the society should decide on how to allocate 24 units of depletable resource between two periods (period 1 and period 2). Benefit and cost of extracting qi units of depletable resource in period i = 1,2 are Bi = 127qi – 2qi2 and Ci = 17qi respectively. How much should the society extract in period 1 if the discount rate is 2%?
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