Think the two-period model for a depletable resource such as coal. Period 1 is current time and period 2 is future, a year later. Annual discount rate is 5%. The (inverse) demand function for period 1 is P=27-Q and its marginal (extraction) cost is constant 3. The (inverse) demand function for period 2 is P=15-0.5Q and its marginal (extraction) cost is constant 3. Suppose the supply of coal is limited to 30 units. Marginal net benefit for period 1 is MNB1= Q1. Marginal net benefit for period 2 is MNB2= Q2. Hint: Remember you are not discounting marginal net benefit in period 2 yet.
Think the two-period model for a depletable resource such as coal. Period 1 is current time and period 2 is future, a year later. Annual discount rate is 5%. The (inverse) demand function for period 1 is P=27-Q and its marginal (extraction) cost is constant 3. The (inverse) demand function for period 2 is P=15-0.5Q and its marginal (extraction) cost is constant 3. Suppose the supply of coal is limited to 30 units. Marginal net benefit for period 1 is MNB1= Q1. Marginal net benefit for period 2 is MNB2= Q2. Hint: Remember you are not discounting marginal net benefit in period 2 yet.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Think the two-period model for a depletable resource such as coal. Period 1 is current time and period 2 is
future, a year later. Annual discount rate is 5%. The (inverse) demand function for period 1 is P=27-Q and
its marginal (extraction) cost is constant 3. The (inverse) demand function for period 2 is P=15-0.5Q and its
marginal (extraction) cost is constant 3.
Suppose the supply of coal is limited to 30 units. Marginal net benefit for period 1 is MNB1=
Q1. Marginal net benefit for period 2 is MNB2=
Q2. Hint: Remember you are not discounting
marginal net benefit in period 2 yet.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5f5b8015-45e8-4f4c-8a9b-f305effd232c%2F75d32093-1806-4f15-9ae3-ba18e7b8a891%2F4rqn6pv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Think the two-period model for a depletable resource such as coal. Period 1 is current time and period 2 is
future, a year later. Annual discount rate is 5%. The (inverse) demand function for period 1 is P=27-Q and
its marginal (extraction) cost is constant 3. The (inverse) demand function for period 2 is P=15-0.5Q and its
marginal (extraction) cost is constant 3.
Suppose the supply of coal is limited to 30 units. Marginal net benefit for period 1 is MNB1=
Q1. Marginal net benefit for period 2 is MNB2=
Q2. Hint: Remember you are not discounting
marginal net benefit in period 2 yet.
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