Question
Assume that we have a fixed supply of a depletable resource to allocate between two periods. Assume further that the demand function is constant
Assume that we have a fixed supply of a depletable resource to allocate between two periods. Assume further that the demand function is constant in the two periods, the marginal willingness to pay is given by the formula P = 16 -0.3q, and marginal cost is constant at $3 per unit. The total supply is 11 units. What percent of the total should be consumed during the first period if the discount rate is 2%?
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Step: 1
To determine the optimal allocation of the depletable resource between the two periods we can use the Hotellings rule Hotellings rule states that the ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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Intermediate Microeconomics
Authors: Hal R. Varian
9th edition
978-0393123975, 393123979, 393123960, 978-0393919677, 393919676, 978-0393123968
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