onsider a two-period competitive extraction model (where t = 0, 1) where demand is pt = 100 - 4qt, where qt is million tons mined per period, total extraction costs are 0 (the marginal extraction cost is zero), and the discount rate is 10 percent. If the total stock available to mine over these two periods equals 60 million tons, then… A. there is scarcity and the marginal user cost is positive. B. there is no scarcity and the marginal user cost is zero. C. there is scarcity but the marginal user cost is zero. D. there is no scarcity because the marginal extraction cost is zero. Consider the previous question. Based on your answer to that question, we would expect (note: you don't need to solve for any quantity levels to answer this question): A. q1 to be larger than q0. B. q0 to be larger than q1. (wrong) C. q0 to be the same as q1. D. q0 to be positive and q1 to be negative.
Consider a two-period competitive extraction model (where t = 0, 1) where demand is pt = 100 - 4qt, where qt is million tons mined per period, total extraction costs are 0 (the marginal extraction cost is zero), and the discount rate is 10 percent. If the total stock available to mine over these two periods equals 60 million tons, then…
A. there is scarcity and the marginal user cost is positive.
B. there is no scarcity and the marginal user cost is zero.
C. there is scarcity but the marginal user cost is zero.
D. there is no scarcity because the marginal extraction cost is zero.
Consider the previous question. Based on your answer to that question, we would expect (note: you don't need to solve for any quantity levels to answer this question):
A. q1 to be larger than q0.
B. q0 to be larger than q1. (wrong)
C. q0 to be the same as q1.
D. q0 to be positive and q1 to be negative.
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