Natural Resources Homework #1

 

Instructions:

 

Homework assignments are optional – there is no penalty for not completing an assignment.

 

If you like, you can work with other students in the class. Just turn in one assignment per group and include all names.

 

Each student can earn up to 1 point per homework. The point will be added to the first exam score.

 

E-mail your work to the class TA: Shan Zhou (shan.zhou@colorado.edu).

Or you can turn in the work at the beginning of class.

 

The deadline to submit your work is at the beginning of class on Monday, Sept. 21st.

 

If you have any questions please ask at the beginning of class.

 

1) For a renewable resource find the efficient output level. Use the following information:

·         MC = 4

·         P = 8 - 0.5 q

 

 

 

 

2) For a depletable resource find the efficient output level and related price for time period 1 and time period 2. Use the following information:

 

·         Two time periods.

·         MC = 2

·         P = 8 - 0.5 q

·         Total resource available = 16

·         r = 0.15

 

Answers

Consumption Time Period 1 =

 

Consumption Time Period 2 =

 

Price Time Period 1 =

 

Price Time Period 2 =

 

3) Following question #2, if the discount rate ( r ) increases to a higher value what happens to the distribution of consumption between the two time periods?