Suppose Appalachia has 200 tons of coal to allocate between this period and next period. The net marginal benefit curve for coal this period is a straight line with a vertical intercept of 200 and a horizontal intercept of 200. The net marginal benefit curve for coal next period is a straight line with a vertical intercept of 200 and a horizontal intercept of 100.
a) Draw the net MB curves for each period on the graph.
b) If the discount rate for benefits next period is infinity, what is the dynamically efficient quantity of coal to use in the present period? ______
c) Use a dotted line to draw the discounted net marginal benefit curve if the discount rate for benefits next period is 300%.
d) Assuming the discount rate for future benefits is 300%, label the dynamically efficient quantity of coal to use this period as Q₁.

Question

Suppose Appalachia has 200 tons of coal to allocate between this period and next period. The net marginal benefit curve for coal this period is a straight line with a vertical intercept of 200 and a horizontal intercept of 200. The net marginal benefit curve for coal next period is a straight line with a vertical intercept of 200 and a horizontal intercept of 100.

a) Draw the net MB curves for each period on the graph.
b) If the discount rate for benefits next period is infinity, what is the dynamically efficient quantity of coal to use in the present period? ______
c) Use a dotted line to draw the discounted net marginal benefit curve if the discount rate for benefits next period is 300%.
d) Assuming the discount rate for future benefits is 300%, label the dynamically efficient quantity of coal to use this period as Q₁.

Quizplus · Accepted Answer

The Answer of Suppose Appalachia has 200 tons of coal to allocate between this period and next period. The net marginal benefit curve for coal this period is a straight line with a vertical intercept of 200 and a horizontal intercept of 200. The net marginal benefit curve for coal next period is a straight line with a vertical intercept of 200 and a horizontal intercept of 100. a) Draw the net MB curves for each period on the graph. b) If the discount rate for benefits next period is infinity, what is the dynamically efficient quantity of coal to use in the present period? ______ c) Use a dotted line to draw the discounted net marginal benefit curve if the discount rate for benefits next period is 300%. d) Assuming the discount rate for future benefits is 300%, label the dynamically efficient quantity of coal to use this period as Q₁.

Suppose Appalachia Has 200 Tons of Coal to Allocate Between