Question
please help with this problem Consider the extraction of a depletable resource over two periods with a constant marginal extraction cost (MEC), identical demand conditions
please help with this problem
Consider the extraction of a depletable resource over two periods with a constant marginal extraction cost (MEC), identical demand conditions and a positive discount rate (r).
i) which condition must be satisfied in order to achieve intergenerational efficiency? Using marginal reasoning, and the notion of marginal user cost (MUC), provide an economic interpretation of that condition.
ii) assume marginal benefit is given by P=19-0.1q (where q is the extracted quantity during the period), MEC=1, r=25% and total available quantity is equal to 90. Determine the efficient extraction in period 1.
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