Statistics Solutions

(Steps Shown) Suppose that in a two-period model of a competitive mining industry, the fixed stock of ore is 1500 tonnes. Assume that the price is $515

Question: Suppose that in a two-period model of a competitive mining industry, the fixed stock of ore is 1500 tonnes. Assume that the price is $515 per tonne and the cost of extraction is given by:

\[C\left(q_{t}\right)=0.1 q_{t}^{2}+10 q_{t}+100\]

Also assume that the rate of interest at which rents are discounted is 5 percent. Find the optimal extraction path.

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