Suppose market demand for oil is Q(P)-5-0.125P where Q is billions of barrels (BBL) or oil per year and P is price per barrel. Marginal extraction costs are $5 per barrel. There is a total of 8 BBL of oil available to use in periods 0 (current year) and 1 (next year). Assume the annual interest rate is 5 %. Use Hotelling's model and write down the final value (rounded up to 4 decimal places) for the following:
Suppose market demand for oil is Q(P)-5-0.125P where Q is billions of barrels (BBL) or oil per year and P is price per barrel. Marginal extraction costs are $5 per barrel. There is a total of 8 BBL of oil available to use in periods 0 (current year) and 1 (next year). Assume the annual interest rate is 5 %. Use Hotelling's model and write down the final value (rounded up to 4 decimal places) for the following:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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.
![NOTE: Your Final Answer value should be rounded up to 4 decimal places. Do not
put $ and comma symbol.
Suppose market demand for oil is Q(P)=5-0.125P
where Q is billions of barrels (BBL) or oil per year and P is price per barrel. Marginal
extraction costs are $5 per barrel. There is a total of 8 BBL of oil available to use in
periods 0 (current year) and 1 (next year). Assume the annual interest rate is 5 %.
Use Hotelling's model and write down the final value (rounded up to 4 decimal
places) for the following:
Blank 1: Q1 (Quantity at time period 1)
Blank 2: P1 (Price at time period 1)
Blank 3: PV(SWI
Blank # 1
Blank # 2
Blank # 3](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F627efc1e-6dd5-490e-992b-10ac9c65fb29%2Ff8757598-6e6c-4be0-8adb-515eaff3e9a0%2Fdpz0fgq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:NOTE: Your Final Answer value should be rounded up to 4 decimal places. Do not
put $ and comma symbol.
Suppose market demand for oil is Q(P)=5-0.125P
where Q is billions of barrels (BBL) or oil per year and P is price per barrel. Marginal
extraction costs are $5 per barrel. There is a total of 8 BBL of oil available to use in
periods 0 (current year) and 1 (next year). Assume the annual interest rate is 5 %.
Use Hotelling's model and write down the final value (rounded up to 4 decimal
places) for the following:
Blank 1: Q1 (Quantity at time period 1)
Blank 2: P1 (Price at time period 1)
Blank 3: PV(SWI
Blank # 1
Blank # 2
Blank # 3
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