Consider a two-period dynamic resource allocation problem where the efficient allocation of a resource implies a market price of $4 in the first period (i.e., P1=4). Assuming that the constant marginal extraction cost of the resource in both periods is $1 and that the social discount rate is 10% (i.e., r=0.10), what must the socially efficient market price in the second period P2 be? Please round your final answer to two decimal places if necessary. a. $4.30 b. $11.20 c. $4 d. $1

Consider a two-period dynamic resource allocation problem where the efficient allocation of a resource implies a market price of $4 in the first period (i.e., P1=4). Assuming that the constant marginal extraction cost of the resource in both periods is $1 and that the social discount rate is 10% (i.e., r=0.10), what must the socially efficient market price in the second period P2 be? Please round your final answer to two decimal places if necessary. a. $4.30 b. $11.20 c. $4 d. $1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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