Suppose you own a small deposit of copper and you plan to completely mine the copper this yearand next year.The marginal benefit (inverse demand) of copper mining isp= 10 – 0.5ąWhere q is the quantity extracted. The marginal cost (supply) of mining copper isp = 3A. First, assume that your copper deposit is not limited. What would be the efficient quantityto extract annually? Round to 3 decimal places (12.345).B. Now suppose the total stock of the copper deposit is 20. What is the quantity that shouldyou extract in period 1 and period 2 under dynamic efficiency, assuming a discount rateof 15%? Round to 3 decimal places (12.345). C. What is the value (price) that corresponds with the optimal consumption choice in period1 and 2? What is the scarcity value in each period?D. What is the present value of the marginal net benefit from the optimal choice of copperextracted in period 1? What is the present value of the marginal net benefit from theoptimal choice of copper extracted in period 2? Comment on your calculations.E. What is the net present value of the allocation you solved for in part B?

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Suppose you own a small deposit of copper and you plan to completely mine the copper this year and next year. The marginal benefit (inverse demand) of copper mining is p= 10 – 0.5q Where q is the quantity extracted. The marginal cost (supply) of mining copper is p = 3

Suppose you own a small deposit of copper and you plan to completely mine the copper this year and next year. The marginal benefit (inverse demand) of copper mining is p= 10 – 0.5q Where q is the quantity extracted. The marginal cost (supply) of mining copper is p = 3

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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