Question

)Suppose that Wakanda is concerned about eciently allocating
its limited

supply of Vibranium, a nonrenewable natural resource, over two
time periods.

Assume that the inverse demand for Vibranium in the two
periods is given

by:

MB = 350 − 2q

where q denotes the amount of Vibranium consumed. The marginal
cost of

extracting Vibranium is denoted by:

MC = 50 + q

a.How much Vibranium would Wakandans wish to have in each time
period,

ignoring the other time period? That is, what is the static
ecient amount of

Vibranium to be consumed in each period? (4 pts)

Now, suppose that there are a total of 100 units of Vibranium
available for

the two periods. Let the discount rate be r = 5%.

b.What is the magnitude of scarcity of Vibranium (in units)
over the two

time periods, using the static allocations? (3 pts)

c.Now, solve for the dynamically ecient allocation of
Vibranium. (4 pts)

d.Show the dynamically ecient allocation graphically. (4
pts)

e.What would be the marginal user cost ineach period? No need
to

discount the second period MUC. (4 pts

Answer #1

Consider a nonrenewable resource that can be consumed either
today (period 1) or tomorrow (period 2) and has a finite supply of
12 units. Assume the inverse demand for the resource in both
periods is:
P_1 = 90 - 5Q_1
P_2 = 90 - 5Q_2
Assume the marginal cost of extracting the resource is constant
at $15 and the social discount rate is 10 percent (r =
.10).
If the social discount rate is decreased to 5% (r =
.05),...

In this problem you will compute the dynamically efficient
allocation of a depletable, non-recyclable resource. To answer the
questions below, assume the following:
Allocate resource between two time periods t=1,2
The fixed supply of the resource is 10 barrels
Demand is same in both periods and given by Pt = 15
– qt
Marginal cost of extracting the resource is the same in both
periods and is given by MCt=$5
The discount rate is 7%
1. What is the equation...

) In class, we developed a simple two-period model of
dynamically efficient etraction of a nonrenewable resource with a
finite stock of 20 units, constant marginal extraction costs of
2.0, and constant demand given by the inverse demand function: p =
8 - 0.4 q Everything remains as before (including the 10% interest
rate), except for the demand for the resource. We now change the
situation in the following manner: we know in period 1 that due to
technological change,...

Efficient Allocations for Depletable Resources
n = 2 time periods.
Inverse Demand Curves:
P1 = 10 - 0.4q1 for period 1 and
P2 = 10 - 0.4q2 for period 2.
Marginal Costs for the two periods:
MC1 = $3.00
MC2 = $3.00
Discount rate = 15%
Resource Availability Constraint:
Q = q1 + q2 = 25 billion
units.
Calculate the dynamically efficient allocations
q1* and q2* for periods 1 and
2.
Dynamic efficiency condition
MNB1 = λ = PV MNB2...

step by step solution for the below question
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Question 11 pts
What is the difference between positive
economics and normative economics?
Group of answer choices
Positive economics deals with dynamic systems, while normative
economics focuses on static systems.
Normative economics deals with how the world actually works,
whereas positive economics focuses on what people ought to do.
Positive economics requires making value judgments, while
normative economics relies solely on factual statements.
Normative economics applies in cases...

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