Assume now that we know that there is only 200 barrels of oil in the ground which must last society for 2 years. The extraction cost is $10 per barrel. Each year, the demand for oil is P = $30 - (Q/5), where Q is the quantity extracted. How many barrels of oil will be extracted in the first year? a. 200 b. 150 c. 100 d. 50 Assume now that the demand in the previous question is now P = 40 - (Q/5) (i.e. that the interest rate is zero) How many barrels would the supplier produce each year so that his combined returns for both periods is maximized? a. 200 b. 150 c. 100 d. 50 Using the information from the previous 2 questions. The producer would define his user costs to be ____ and the total marginal costs to be ____ a. $30, $20 b. $20, $20 c. $10, $10 d. $20, $10 Please explain how to solve it
Assume now that we know that there is only 200 barrels of oil in the ground which must last society for 2 years. The extraction cost is $10 per barrel. Each year, the demand for oil is P = $30 - (Q/5), where Q is the quantity extracted. How many barrels of oil will be extracted in the first year? a. 200 b. 150 c. 100 d. 50 Assume now that the demand in the previous question is now P = 40 - (Q/5) (i.e. that the interest rate is zero) How many barrels would the supplier produce each year so that his combined returns for both periods is maximized? a. 200 b. 150 c. 100 d. 50 Using the information from the previous 2 questions. The producer would define his user costs to be ____ and the total marginal costs to be ____ a. $30, $20 b. $20, $20 c. $10, $10 d. $20, $10 Please explain how to solve it
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume now that we know that there is only 200 barrels of oil in the ground which must last society for 2 years. The extraction cost is $10 per barrel. Each year, the demand for oil is P = $30 - (Q/5), where Q is the quantity extracted. How many barrels of oil will be extracted in the first year?
a. 200
b. 150
c. 100
d. 50
Assume now that the demand in the previous question is now P = 40 - (Q/5) (i.e. that the interest rate is zero) How many barrels would the supplier produce each year so that his combined returns for both periods is maximized?
a. 200
b. 150
c. 100
d. 50
Using the information from the previous 2 questions. The producer would define his user costs to be ____ and the total marginal costs to be ____
a. $30, $20
b. $20, $20
c. $10, $10
d. $20, $10
Please explain how to solve it
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