INSTRUCTIONS:
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 12 units were 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 10 percent (i.e., r = 0.10)? - What would be the efficient price in the two periods? - What would be the marginal user cost in each period?