Assume that we have a fixed supply of a depletable resource to allocate between two periods....

 

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Assume that we have a fixed supply of a depletable resource to allocate between two periods. Assume further that the demand function is constant in the two periods, the marginal willingness to pay is given by the formula P = 16 -0.3q, and marginal cost is constant at $3 per unit. The total supply is 11 units. What percent of the total should be consumed during the first period if the discount rate is 2%? Assume that we have a fixed supply of a depletable resource to allocate between two periods. Assume further that the demand function is constant in the two periods, the marginal willingness to pay is given by the formula P = 16 -0.3q, and marginal cost is constant at $3 per unit. The total supply is 11 units. What percent of the total should be consumed during the first period if the discount rate is 2%?

Answer rating: 100% (QA)

To determine the optimal allocation of the depletable resource between the two periods we can use the Hotellings rule Hotellings rule states that the ... View the full answer