Suppose we allocate a fixed supply of a depletable resource between two periods in a dynamically efficient way. Assume further that the demand function is constant in the two periods and the marginal willingness to pay is given by the formula P = 8 - 0.33q while the marginal cost is constant at $1 per unit. The total supply is 20 units and the discount rate is 1%. What is the marginal user cost during the first period?

Suppose we allocate a fixed supply of a depletable resource between two periods in a dynamically efficient way. Assume further that the demand function is constant in the two periods and the marginal willingness to pay is given by the formula P = 8 - 0.33q while the marginal cost is constant at $1 per unit. The total supply is 20 units and the discount rate is 1%. What is the marginal user cost during the first period?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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