Determine optimal prices-marginal user cost in both periods

Assignment Help Business Economics

Reference no: EM131245974

Assume that the Marginal Cost in period 1 is constant and equal to MC₁=$2; and the Marginal Cost in period 2 is also constant and equal to MC₂=$4. In addition, assume that the discount rate is 5%, the total amount of the depletable resource is 35 tons and the demand function in period 1 is P_t=40-q₁ and in period 2 is equal to P₂=15-q₂ . [Use only the first two significant digits of a number]

a. Determine the dynamic efficient allocation.

b. Determine the optimal prices and marginal user cost in both periods (in current value).

c. Construct a graph representing the dynamic efficient allocations in both periods.

d. Determine the Net benefit in both periods. Are they equal? If your answer is no argue, how future generations could be compensated for this difference.

Reference no: EM131245974

Questions Cloud

Supply and demand-hypothesis : Supply and Demand: Suppose a survey shows an increase in illicit drug use by young people in the US. In the ensuing debate, two hypotheses for the increase are proposed: Hypothesis: Reduced police efforts have increased the availability of drugs on t..

Trade and opportunity cost : Trade/Opportunity Cost: Pat and Kris are roommates. Outside of the time they spend studying, they spend time doing some of their favorite activities: making pizza and brewing root beer. What is each roommate’s opportunity cost of making a pizza? Who ..

Find the socially optimal equilibrium price and quantity : You have been hired by the town of Bedford, Ohio, to conduct an analysis of ongoing operations by a local Coca Cola bottler. A study by the Ohio Environmental Protection Agency found that this firms’ water pollution is negatively affecting the enviro..

Three investment opportunities available for period : Linda inherited a sum of $50,000 from one of her grandparents. She would like to wisely invest the inheritance in one of the following three investment opportunities available for a period of 10 years. Help choose the best investment opportunity for ..

Determine optimal prices-marginal user cost in both periods : Assume that the Marginal Cost in period 1 is constant and equal to MC1=$2; and the Marginal Cost in period 2 is also constant and equal to MC2=$4. Determine the dynamic efficient allocation. Determine the optimal prices and marginal user cost in both..

Assuming the money grows at nominal annual interest rate : You are planning to send your child to a summer camp in 9 months. The camp will cost you $1,200 at that time. You have decided to invest a lump sum of money now that will grow to $1,200 by the time it is needed. Assuming the money grows at a nominal ..

What is the breakeven point : Pace Tech Engineering Inc manufactures an electronic toy. The company has a building with a floor area of 180,000 square feet for both the manufacturing and warehousing operations. The company produces all of the components that go into the toy. What..

Mentioned in the specification of the product : Suppose you are a senior engineer of a company that manufactures car seat for toddlers. You know that the strength of the belt of a recently designed car seat is slightly less than mentioned in the specification of the product. Your supervisor has as..

Find the labor demand and labor supply for an economy : In this problem we will find the labor demand and labor supply for an economy, from there we will determine the equilibrium quantity of labor, and by plugging that into the production function we will find GDP. Consider a firm that operates in a perf..

User Account

All Pages