Question
All part of one question, I have solved it 3 times with different answers for all, I need someone to explain this whole thing and
All part of one question, I have solved it 3 times with different answers for all, I need someone to explain this whole thing and answer please!!
1. Consider the problem of a mining firm over two periods (0 and 1). The firm has access to X = 12 units of a nonrenewable resource and must set extraction levels in each period (q0 and q1, respectively). Price over the two periods is fixed at p = 20. The firm's marginal cost of extraction is MC(qt) = 5 + qt.
a. What is the firm's total rent maximizing extraction plan assuming it applies a 10% discount rate (r = 0.1)
b. Suppose instead X = 35. Redo Problem #1.a. Does your answer change? Provide intuition for your finding using complete sentences.
c. Assume once again that X = 12. What are the total resource rents the firm earns under the efficient policy in periods 0 and 1? Total resource rents in this problem are the same as the (total) profit the firm earns from mining.
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