1. As seen in this chapter, the model of dynamic efficiency is obtained when present and future uses of a depletable resource are in balance—by maximizing present value of net benefits derived from its use. There are various ways to achieve this—

by finding an optimal combination of the two values with the help of a computer or the application of mathematical formulae (refer to the chapter’s appendix.)

a. If only two periods are assumed, so that they can be drawn on a graph, where does efficient allocation lie?

b. Provide comments on how the model can be expanded.