Efficient Allocation

  

Week 2 Assignment – Efficient Allocation

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In the numerical example given in the text, the inverse demand function for the depletable resource is P = 8 – 0.4q and the marginal cost of supplying it is $4.

· If 40 units are to be allocated between two periods, in a dynamic efficient allocation how much would be allocated to the first period and how much to the second when the discount rate is zero?

· What would be the efficient price in the two periods?

· What would be the marginal user cost in each period?

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