Solve for the firms profit-maximizing extraction

Reference no: EM133376212

Consider the following two-period model: A firm faces extraction cost C(2, y) = 2½ for a non renewable resource. The firm is a price taker and knows that in period 0, Po = 10 and in the following period Pi = 12. The firm's discount rate is p = 0.9 and it has 0 = 100 units of the resource at t = 0.

(a) Write down the firm's optimization problem.

(b) Solve for the firm's profit-maximizing extraction quantities in each period, Yo and y. (pt) Is it optimal for the firm to extract all the resources? Why or why not?

Reference no: EM133376212

Questions Cloud

What are some factors of production used by practitioners : What are some factors of production used by practitioners in the healthcare area 1. Identify specific US industries. 2. Identify foreign industries

What sorts of programs would you devise : If you were tasked with maximizing the contributions of the growing number of retirees to Chinese society, what sorts of programs would you devise

Identify the cs-us-ur and cr before therapy : The therapy has to be based on classical conditioning. Tell me how the therapy would work and identify the CS, US, UR, and CR before therapy.

How these relate to the other resources focussed : how these relate to the other resources focussed on application in real world contexts. In your essay show that you fully comprehend the required reading

Solve for the firms profit-maximizing extraction : Solve for the firms profit-maximizing extraction quantities in each period, Yo and y. (pt) Is it optimal for the firm to extract all the resources? Why or why

Why do you need thorough understanding of the law : Why do you need a thorough understanding of the law as it impacts your employer's practice?

Review the cost benefit analysis case study on regulations : Review the Cost Benefit Analysis Case Study on Regulations to Lower the Level of Sulphur in Gasoline answer the following questions.

How does canada handle core curriculum decisions : How does Canada handle core curriculum decisions?

What price should you charge for a midsized automobile : What price should you charge for a midsized automobile if you expect to maintain your record sales? Instructions: Enter your response rounded to two decimal

User Account

All Pages