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Consider the allocation of a delectable resource over two periods. There are Qbar=4 units of the stock available. The total benefits derived from using the resource are defined as TBt= 20qt- (1/2qt^2) and the total cost of extracting the resource is defined as TCt=5qt

What are the values of q0 and q1 that maximize the net benefits of using the resource if the discount rate is 10%? What if the discount rate is 5%?

Now suppose there are Qbar = 30 units of the stock available. How do the answers to part (a) change? What is your intuition?

What is the shadow price in period zero?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91520977

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