The demand for xenite ore is fixed over time and is given as:
q = 40 - P
where q is the number to tons of ore produced and P is the price per ton of xenite ore. The marginal extraction cost is $15 per ton and is also constant over time. The total quantity of the resource currently known to exist is 53.29 tons. The interest rate is 10 percent. Using the Hotelling rule for an exhaustible resource, complete the following table.
Time Period Price Marginal Cost q Cumulative
Production
Today 15
1 Year 15
2 Years 15
3 Years 15
4 Years 15
5 Years 15
6 Years 15
7 Years 40.00 15 0 53.29
Time Period Price Marginal Cost q Cumulative
Production
Today 27.83 15 12.17 12.17
1 Year 29.11 15 10.89 23.06
2 Years 30.52 15 9.48 32.54
3 Years 32.08 15 7.92 40.46
4 Years 33.78 15 6.22 46.68
5 Years 35.66 15 4.34 51.02
6 Years 37.73 15 2.27 53.29
7 Years 40.00 15 0.00 53.29
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