1. Consider two-period model of exhaustible natural resources, where the in- verse demand function for resource is P = 9 0.3q in each period and the marginal cost of supplying it is $0 per unit.
2. If the total supply of the natural resource is 30 units, and the discount rate is 20% per period,
3. (a) in the context of this example, is this resource a scarce resource? Why yes or why not? [3 points]
4. (b) (i) How should this resource be allocated between the two periods? (ii) What is the marginal user cost at the optimal allocation? (iii) What would the efficient price be in the two periods? Note: graphs are essential to this problem. [10 points]