There are only 28 units of Metal Z on a small island. The demand and supply...

 

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There are only 28 units of Metal Z on a small island. The demand and supply of Metal Z are characterized, respectively, by Pp=10-0.5Q and Ps= 5 +0.5Q. The goal of this problem is to find the economically efficient allocation of Metal Z between consumers today and consumers of this metal 8 years from now. (a) Assuming that the demand and supply of Metal Z 8 years from now will be the same as today, what are the formulae that would characterize the marginal net benefits of Metal Z in the present period (MNB₁) and the undiscounted marginal net benefits 8 years from now (MNB₂). Show all calculations clearly. (10 points) There are only 28 units of Metal Z on a small island. The demand and supply of Metal Z are characterized, respectively, by Pp=10-0.5Q and Ps= 5 +0.5Q. The goal of this problem is to find the economically efficient allocation of Metal Z between consumers today and consumers of this metal 8 years from now. (a) Assuming that the demand and supply of Metal Z 8 years from now will be the same as today, what are the formulae that would characterize the marginal net benefits of Metal Z in the present period (MNB₁) and the undiscounted marginal net benefits 8 years from now (MNB₂). Show all calculations clearly. (10 points)

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First we calculate the equilibrium quantity and price of Metal Z ... View the full answer