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