Reference no: EM133269155

Question 1. The city considers creating a new public park. Developing the trails and other infrastructure for the park costs $ 2 Million. Additionally, the city has to pay $10,000 every year for maintenance. Instead, the city could also sell the land for $ 2 Million for residential development. What are the costs of the public park (assuming that the benefits of both uses are equal and that the discount rate is 10%)? Please give your answer in million.

Question 2. Imagine you own an oil well. You can sell oil for $60 per barrel. Pumping oil has the current marginal cost of MC = Q. However, pumping more oil this reduces the value of the oil well because there is less oil left. Each additional barrel that you pump this year reduces the present value of the oil well by MUC = 0.5 Q. How much oil should you pump this year?