2. Your country is considering how to allocate cobalt, a non-renewable natural resource. The per period demand curve is: P = 120 - 2q The marginal cost of extraction is 20. There is a total supply of cobalt (Q) is 80. a. [5 points] What is the static efficient level of extraction in each period? b. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 0? c. [5 points] Graph the dynamically efficient level of extraction in each period with the quantity of resource on the horizontal, period 1 net benefits on the left and period 2 net benefits on the right-hand axis. d. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 20%? e. [20 points] Imagine that this was a three-period model. What would the dynamically efficient outcome be with a discount rate of 20%? I
2. Your country is considering how to allocate cobalt, a non-renewable natural resource. The per period demand curve is: P = 120 - 2q The marginal cost of extraction is 20. There is a total supply of cobalt (Q) is 80. a. [5 points] What is the static efficient level of extraction in each period? b. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 0? c. [5 points] Graph the dynamically efficient level of extraction in each period with the quantity of resource on the horizontal, period 1 net benefits on the left and period 2 net benefits on the right-hand axis. d. [10 points] What is the dynamically efficient level of extraction in each period with a discount rate of 20%? e. [20 points] Imagine that this was a three-period model. What would the dynamically efficient outcome be with a discount rate of 20%? I
Chapter32: The Land Market And Natural Resources
Section: Chapter Questions
Problem 8E
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![2. Your country is considering how to allocate cobalt, a non-renewable natural resource. The
per period demand curve is:
P = 120 - 2q
The marginal cost of extraction is 20. There is a total supply of cobalt (Q) is 80.
a. [5 points] What is the static efficient level of extraction in each period?
b. [10 points] What is the dynamically efficient level of extraction in each period with a
discount rate of 0?
c. [5 points] Graph the dynamically efficient level of extraction in each period with the
quantity of resource on the horizontal, period 1 net benefits on the left and period 2
net benefits on the right-hand axis.
d. [10 points] What is the dynamically efficient level of extraction in each period with a
discount rate of 20%?
e. [20 points] Imagine that this was a three-period model. What would the dynamically
efficient outcome be with a discount rate of 20%?
I](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3eb2aa46-8fe4-4712-8585-3c1289bc3e38%2Fde91f9d1-df00-4d5d-ba2c-de6e2a1ed6c9%2Fwddane_processed.jpeg&w=3840&q=75)
Transcribed Image Text:2. Your country is considering how to allocate cobalt, a non-renewable natural resource. The
per period demand curve is:
P = 120 - 2q
The marginal cost of extraction is 20. There is a total supply of cobalt (Q) is 80.
a. [5 points] What is the static efficient level of extraction in each period?
b. [10 points] What is the dynamically efficient level of extraction in each period with a
discount rate of 0?
c. [5 points] Graph the dynamically efficient level of extraction in each period with the
quantity of resource on the horizontal, period 1 net benefits on the left and period 2
net benefits on the right-hand axis.
d. [10 points] What is the dynamically efficient level of extraction in each period with a
discount rate of 20%?
e. [20 points] Imagine that this was a three-period model. What would the dynamically
efficient outcome be with a discount rate of 20%?
I
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