#2. You have two periods. I've given you an externality with MEC=0.05q1. So, MB1=8-0.4q1MB2=8-0.4q2.So, the externality is a cost realized in period 2 but caused by period 1's production choice. Q1 belongs to the first period, and Q2 is the second. Suppose a fossil fuel has stable demand and a constant marginal cost. Thereare only two periods. MB = 8 – 0.4q, and MC :the resource and the discount rate is r = 0.10. Solve for the dynamic optimum acrossperiods. Show your mathematical solution, but also depict it graphically (ACCURACYCOUNTS) using the double-vertical axes model from class.a. For help, you can view the solutions for CH5 Self Test 1 and 2 which solve two-2. Suppose there are only 20 units ofperiod models with different setups.Draw again (ACCURATELY) the double-vertical axes model using the curvesand constraints from #1. Suppose we are modeling fossil fuel use and the use of theresource causes a negative externality. For example, the amount we burn in period 1contributes to the negative effects of global warming in period 2. So, let MEC = 0.05q1.Solve for the new dynamic optimum in the presence of the externality.

MB=8-0.4qt MC = 2 Total resources=20 r=0.10 qt=q1+q2 q1--- resources used in period 1 q2---…

Suppose a fossil fuel has stable demand and a constant marginal cost. There are only two periods. MB = 8 – 0.4q; and MC = 2. Suppose there are only 20 units of the resource and the discount rate is r = 0.10. Solve for the dynamic optimum across periods. Show your mathematical solution, but also depict it graphically (ACCURACY COUNTS) using the double-vertical axes model from class.

Suppose a fossil fuel has stable demand and a constant marginal cost. There are only two periods. MB = 8 – 0.4q; and MC = 2. Suppose there are only 20 units of the resource and the discount rate is r = 0.10. Solve for the dynamic optimum across periods. Show your mathematical solution, but also depict it graphically (ACCURACY COUNTS) using the double-vertical axes model from class.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Note:The solution should not be hand written.