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Imagine a scenario where people have 2 periods in which to live, but a limited supply of natural gas to consume (assume that no natural gas will be created in the future). Assume the demand for cubic feet of natural gas is given by the equation, P=350-5Q, the extraction of natural gas has a constant marginal cost of $50 per cubic foot (MC = $50) and the discount rate is 8%.

A. Calculate the Period 1 and Period 2 consumption of natural gas (in cubic feet) that maximizes the present value of total net benefits if there are only 120 cubic feet of natural gas available.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9479290

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