Assume the following: A community, Manatee, has a small groundwater aquifer, with water to allocate over 2 years. Assume that this resource is non-renewable. Each year is labeled Period 1 and 2, respectively. Use 2 decimal places throughout your work. Water reserves = 12,000 litres, to be allocated over Period 1 & Period 2 Interest rates are at 8% Marginal Benefits: MB1 = 5000 - ½Q1 , MB2 = 5000 - ½Q2 Marginal Costs of extraction: MC1 = 120 , MC2 = 120 (a) What is the optimal allocation of water, under a static efficiency allocation, for both periods? (b) What should the dynamic optimal allocations be (quantities and prices) in Period 1 and Period 2?
Assume the following: A community, Manatee, has a small groundwater aquifer, with water to allocate over 2 years. Assume that this resource is non-renewable. Each year is labeled Period 1 and 2, respectively. Use 2 decimal places throughout your work. Water reserves = 12,000 litres, to be allocated over Period 1 & Period 2 Interest rates are at 8% Marginal Benefits: MB1 = 5000 - ½Q1 , MB2 = 5000 - ½Q2 Marginal Costs of extraction: MC1 = 120 , MC2 = 120 (a) What is the optimal allocation of water, under a static efficiency allocation, for both periods? (b) What should the dynamic optimal allocations be (quantities and prices) in Period 1 and Period 2?
Chapter1: Making Economics Decisions
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Assume the following: A community, Manatee, has a small groundwater aquifer, with water to allocate over 2 years. Assume that this resource is non-renewable. Each year is labeled Period 1 and 2, respectively. Use 2 decimal places throughout your work. Water reserves = 12,000 litres, to be allocated over Period 1 & Period 2 Interest rates are at 8% Marginal Benefits: MB1 = 5000 - ½Q1 , MB2 = 5000 - ½Q2
Marginal Costs of extraction: MC1 = 120 , MC2 = 120
(a) What is the optimal allocation of water, under a static efficiency allocation, for both periods?
(b) What should the dynamic optimal allocations be (quantities and prices) in Period 1 and Period 2?
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