9 QUESTION 9Assume that the oil extraction company needs to extract Q units of oil (a depletable resource) reserve in a dynamically efficient manner. Whatshould be a minimum amount of Q so that the oil reserve extraction can last for at least 10 periods if (a) the marginal willingness to pay for oil ineach period is given by P 20-0.2q, (b) marginal cost of extraction is constant at $3 per unit, and (c) discount rate is 2 %?22

P=20-0.2q MC=$ 3 Discount rate= 2%

Assume that the oil extraction company needs to extract Q units of oil (a depletable resource) reserve in a dynamically efficient manner. What should be a minimum amount of a so that the oil reserve extraction can last for at least 10 periods if (a) the marginal willingness to pay for oil in each period is given by P20-0.2q, (b) marginal cost of extraction is constant at $3 per unit, and (c) discount rate is 2 %? 22

Assume that the oil extraction company needs to extract Q units of oil (a depletable resource) reserve in a dynamically efficient manner. What should be a minimum amount of a so that the oil reserve extraction can last for at least 10 periods if (a) the marginal willingness to pay for oil in each period is given by P20-0.2q, (b) marginal cost of extraction is constant at $3 per unit, and (c) discount rate is 2 %? 22

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 4E: In the Southern Company Managerial Challenge, which alternative for complying with the Clean Air Act...

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Assume that the oil extraction company needs to extract Q units of oil (a depletable resource) reserve between two periods in a dynamically efficient manner. What should be a maximum amount of Q so that the entire oil reserve is extracted only during the 1st period if (a) the marginal willingness to pay for oil in each period is given by P = 34 - 0.2q, (b) marginal cost of extraction is constant at $3 per unit, and (c) discount rate is 2%?
Suppose the Marginal Benefit and Marginal Cost for crude oil at any given period is: MB = 159 - 2.1Q and MC=36 + 0.9Q Where price is measured in dollars and quantity is measured in barrels. The total oil reserve is 50 tons. What is the Optimal barrels of oil that should be extracted in the current period (suppose we don’t need to be concerned with any future periods)?
Suppose a firm is facing a two-period (t = 0, 1) depletable resource (e.g., oil) extraction problem. The inverse demand function of the resource is Pt=20–0.5Qt ; marginal extraction cost is MCt = $5/unit; resource stock is Q = 20 units and interest rate is r = 50%. a) Write down the firm’s objective and efficiency condition. Using diagrams for this problem, calculate the dynamically efficient extractions, marginal user costs, present value of scarcity rents, and present value of total net benefits for the two periods.
A local restaurateur who had been running a profitable business for many years, recently purchased a three-way liquor license. This on-premise license gives the owner the legal right to sell beer, wine, and spirits in her restaurant. The cost of obtaining the three-way license was about $90,000, since only 300 such licenses are issued by the state. While the license is transferable, only $75,000 is refundable if the owner chooses not to use the license. After selling alcoholic beverages for about one year, the restaurateur came to the realization that she was losing dining customers and that her profitable restaurant was turning into a noisy, unprofitable bar. Subsequently, she spent about $8,000 placing advertisements in various newspapers and restaurant magazines across the state offering to sell the license for $80,000. After a long wait, she finally received one offer to purchase her license for $77,000. a) Would you recommend that she accept the $77,000 offer? b) The restaurateur…
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