Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Answer only part b: Suppose there is a nonrenewable resource with inverse demand function p= 20- 2q and
with MEC= 10. Suppose the time horizon is 2 periods. The resource stock, S is finite and
= 50 units.
a. If interest rates are 60%, how much should be extracted in each period?
b. What would the prediction be on how much should be extracted in each period if
interest rates fell to 0%?
with MEC= 10. Suppose the time horizon is 2 periods. The resource stock, S is finite and
= 50 units.
a. If interest rates are 60%, how much should be extracted in each period?
b. What would the prediction be on how much should be extracted in each period if
interest rates fell to 0%?
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