(40 points) Suppose you inherit a parcel of land outside Bisby, Arizona with rights to a gold deposit under the surface (and not extending beyond the parcel of land). The marginal benefit and marginal cost of extracting and using a unit of gold are:

MB= 100Q

MC= 10

(a) (10 points) Initially, you believe your gold deposit is so large that you ignore themarginal user cost(MUC) of extraction in any given period. How much gold is it efficient to extract today under this assumption?

(b) (20 points) After further discovery, you learn that your deposit only contains 100 units of gold in total. You must choose how much to extract this year vs. next year. Assuming a discount rate of 5% (r= 0.05), how much should you extract today? How much next year?

(c) (10 points) Suppose the interest rate increases to 10% before you begin extracting. Now how much do you choose to extract today? Add a one to two sentence explanation for why the quantity you extract today increases or decreases.