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Assume you have a limited stock of copper in a mine of 30 units.You want to know how many units to extract this year (Q1)
Assume you have a limited stock of copper in a mine of 30 units.You want to know how many units to extract this year (Q1) and how many to extract next year (Q2).The slope of the marginal benefit curve is:
MB:y =-0.4Q+12
and the slope of the marginal cost curve is:
MC:y=4
Use the formula PV(MB1 - MC1)=PV(MB2 -MC2) tocalculate how many units of copper to extract this year and next year.
The discount rate (r) is9%(0.09).
Report the optimal units of copper to extract this year (Q1),rounded to two (2) decimal places (XX.XX).
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