resource that can be consumed today (period 1) or tomorrow (period 2) and that it has a fixed supply of 10 units. Assume that the inverse demand for the resource in each period is given by: P = 100- 5Q, P2 = 100- 50, Moreover, assume that the marginal extraction cost is constant in both periods at $20 and that the social discount rate is 10% (.e., r#0.10). If the social discount rate is decreased to 5% (i.e., r-0.05), then how much less of the resource would be consumed in the first period? (Hint: solve for the efficient allocation of the resource in first period Q, at r-0.10 and again at r-0.05. The difference between these two values is your answer.) Please round your intermediary calculations (e.g., prices and quantities) and your final answer to two decimal places if necessary. Answer:

resource that can be consumed today (period 1) or tomorrow (period 2) and that it has a fixed supply of 10 units. Assume that the inverse demand for the resource in each period is given by: P = 100- 5Q, P2 = 100- 50, Moreover, assume that the marginal extraction cost is constant in both periods at $20 and that the social discount rate is 10% (.e., r#0.10). If the social discount rate is decreased to 5% (i.e., r-0.05), then how much less of the resource would be consumed in the first period? (Hint: solve for the efficient allocation of the resource in first period Q, at r-0.10 and again at r-0.05. The difference between these two values is your answer.) Please round your intermediary calculations (e.g., prices and quantities) and your final answer to two decimal places if necessary. Answer:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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