Consider a deplete-able resource (e.g. forest land) and a two-period model.Within each period, marginal benefit (MB) of, or willingness to pay for, the resource is identical and given by the formula:P = 60 - 0.7Q.Marginal cost (MC) is a constant $10 per unit, and future values are discounted at a rate of 6 percent (0.06).Suppose there is a total of 120 unitsavailable for the two periods.

1.What is the expression for marginal net benefit (MNB) of the resource in the first period?

2. What is the expression for the present value of the marginal net benefit (MNB) of the resource in the second period?

3. Re-write MNB for the first period substituting Q2 for Q1. (Simplify)

4. Solve for quantity in the first period (Q1), the second period (Q2), and the marginal user cost (MUC).

a) Q1

b) Q2

C) MUC

5 Calculate Net Benefit (NB) for period 1 and period 2

a) Period 1 NB

b) Period 2 NB

6. Calculate net benefits (NB) for periods 1 and 2 if quantities were equally divided between the two periods (i.e. a reasonable alternative allocation).

a) Period 1 NB

b) Period 2 NB

7. Does the dynamically efficient allocation (Q. 4 allocations) satisfy the sustainability criterion?

a) Proof:

b) Yes or No