Assume that the inverse demand function for a two period, Ask an Expert

Economics

Assume that the inverse demand function for a two period depletable resource is P =24 – 0.2q and the constant marginal cost of supplying it is $6 (a = 24, b = 0.2, c = 6)

a. If 60 units are to be allocated between two periods, how much would be allocated to the first period and how much to the second period in a dynamic efficient allocation when the discount rate is zero?

b. What would be the efficient price in the two periods?

c. What would be the marginal user cost in each period?

d. Assume the discount rate is 5%, how much would be allocated to the first and second period?

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