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Extraction of a resource takes place in just two periods, current and future. Current-period marginal costs and marginal benefits behave according to MCC(q) = 15 + q0 and MCB(q)=65−q0. Future net benefits are impacted by current-period consumption, so user costs rise as more is consumed in the current period. Let user costs be represented by UC(q) = 3q0
(a) Sketch a graph of Marginal Benefit, Marginal Current Cost, and Marginal Total Cost as defined in class. If you want to be somewhat fancy and ensure that you don’t make mistakes, you can plug your functions into a spreadsheet and plot them. If not please make sure
(b) Find the optimal level of current resource extraction, q0
(c) If decision-makers ignore all future effects, how much will be extracted in the current period? What would be the efficiency loss from this?
For each item below, draw a graph with quantities of pepperoni pizza on the horizontal axis and quantities of anchovy pizza on the vertical axis to illustrate the following situations. Marvin loves pepperoni pizza and hates anchovy pizza. Mary hates ..
1.the production possibilities curves above show all the possible combinations of helicopters and scooters that two
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The elasticity of variable G with respect to variable S is defined as:
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