Assume the same demand conditions as stated in Problem 1 but let the discount rate be 0. 10 and the marginal cost of extraction be $4. How much would be produced in each period in an efficient allocation? What would be the marginal user cost in each period? Would the static and dynamic efficiency criteria yield the same answers for this problem? Why?

Data from problem 1

In the numerical example given in the text, the inverse demand function for the depletable resource is P = 8 – 0. 4q and the marginal cost of supplying it is $2.