Consider the following market demand function for coal is p t = 200 − 0 . 1 q t . A mining company own a coal mine that has recoverable deposit amount of 2000 tonnes. The firm’s marginal extraction cost is $50 per unit. Assuming only two production periods, a discount rate of 10%, and a perfectly competitive coal market
(a) compute the dynamically efficient production plan
(b) calculate first year and second year prices.
(c) Present the solutions on the same graph