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18 Dec 2019
What is the optimal allocation of 300 units of ore over a two year period? The marginal and average costs of extraction are constant at $100 per unit. The price per unit in each period is given by the willingness-to-pay equation, Pt = 500 â 2Qt, where P denotes price, Q denotes quantity of ore extracted and t = 1, 2. The discount rate is 10%. Determine how much ore should be extracted in year 1 and how much in year 2. Determine the user cost
What is the optimal allocation of 300 units of ore over a two year period? The marginal and average costs of extraction are constant at $100 per unit. The price per unit in each period is given by the willingness-to-pay equation, Pt = 500 â 2Qt, where P denotes price, Q denotes quantity of ore extracted and t = 1, 2. The discount rate is 10%. Determine how much ore should be extracted in year 1 and how much in year 2. Determine the user cost
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