Consider the allocation of a delectable resource over two periods. There are Qbar=4 units of the stock available. The total benefits derived from using the resource are defined as TBt= 20qt- (1/2qt^2) and the total cost of extracting the resource is defined as TCt=5qt
What are the values of q0 and q1 that maximize the net benefits of using the resource if the discount rate is 10%? What if the discount rate is 5%?
Now suppose there are Qbar = 30 units of the stock available. How do the answers to part (a) change? What is your intuition?
What is the shadow price in period zero?