Suppose there is a depletable resource that has a stock-size of 28. The static Marginal Net Benefit in each period is 60 - 1.8q. The discount rate is 20% (r=0.2). The dynamic, efficient solution is for units to be extracted in period 1 and units to be extracted in period 2.

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
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Suppose there is a depletable resource that has a stock-size of 28.
The static Marginal Net Benefit in each period is 60 - 1.8q. The discount rate is 20% (r=0.2).
The dynamic, efficient solution is for
units to be extracted in period 1 and
units to be extracted in
period 2.
Transcribed Image Text:Suppose there is a depletable resource that has a stock-size of 28. The static Marginal Net Benefit in each period is 60 - 1.8q. The discount rate is 20% (r=0.2). The dynamic, efficient solution is for units to be extracted in period 1 and units to be extracted in period 2.
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