resource that can be consumed today (period 1) or tomorrow (period 2) and that it has a fixed supply of 10 units. Assume that the inverse demand for the resource in each period is given by: P = 100- 5Q, P2 = 100- 50, Moreover, assume that the marginal extraction cost is constant in both periods at $20 and that the social discount rate is 10% (.e., r#0.10). If the social discount rate is decreased to 5% (i.e., r-0.05), then how much less of the resource would be consumed in the first period? (Hint: solve for the efficient allocation of the resource in first period Q, at r-0.10 and again at r-0.05. The difference between these two values is your answer.) Please round your intermediary calculations (e.g., prices and quantities) and your final answer to two decimal places if necessary. Answer:
resource that can be consumed today (period 1) or tomorrow (period 2) and that it has a fixed supply of 10 units. Assume that the inverse demand for the resource in each period is given by: P = 100- 5Q, P2 = 100- 50, Moreover, assume that the marginal extraction cost is constant in both periods at $20 and that the social discount rate is 10% (.e., r#0.10). If the social discount rate is decreased to 5% (i.e., r-0.05), then how much less of the resource would be consumed in the first period? (Hint: solve for the efficient allocation of the resource in first period Q, at r-0.10 and again at r-0.05. The difference between these two values is your answer.) Please round your intermediary calculations (e.g., prices and quantities) and your final answer to two decimal places if necessary. Answer:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Suppose that there is a nonrenewable resource that can be consumed today (period 1) or tomorrow (period 2) and that it
has a fixed supply of 10 units. Assume that the inverse demand for the resource in each period is given by:
P; = 100- 5Q;
P2 = 100- 50,
%3D
%3D
Moreover, assume that the marginal extraction cost is constant in both periods at $20 and that the social discount rate is
10% (i.e., r=0.10).
If the social discount rate is decreased to 5% (i.e., r=0.05), then how much less of the resource would be consumed in the
first period?
(Hint: solve for the efficient allocation of the resource in first period Q, at r=0.10 and again at r=0.05. The difference
between these two values is your answer.)
Piease round your intermediary calculations (e.g., prices and quantities) and your final answer to two decimal places if
necessary.
Answer:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F172fd94c-fa36-4ea1-a8dc-d1196910a32a%2F3c462401-11e6-4927-8627-fe4bf04f1791%2F0mi9ikf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose that there is a nonrenewable resource that can be consumed today (period 1) or tomorrow (period 2) and that it
has a fixed supply of 10 units. Assume that the inverse demand for the resource in each period is given by:
P; = 100- 5Q;
P2 = 100- 50,
%3D
%3D
Moreover, assume that the marginal extraction cost is constant in both periods at $20 and that the social discount rate is
10% (i.e., r=0.10).
If the social discount rate is decreased to 5% (i.e., r=0.05), then how much less of the resource would be consumed in the
first period?
(Hint: solve for the efficient allocation of the resource in first period Q, at r=0.10 and again at r=0.05. The difference
between these two values is your answer.)
Piease round your intermediary calculations (e.g., prices and quantities) and your final answer to two decimal places if
necessary.
Answer:
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