Question

Assume the following for a rare and valuable resource, Lithium.

1. The socially optimal quantity for every period is 42 tons.

2. There exist, in total, 150 tons of lithium in reserve.

3. There are 2-periods we like to consider in the allocation of this resource.

Please answer the following questions in a clear and concise fashion:

1. What is the socially efficient quantity for the 2 periods?

2. At the socially efficient quantity, did the 1st period incur any User Cost?

if yes, provide the amount. If no, explain why there is no user cost.

Answer 1

Answer): - According to question socially optimal quantity for every period is 42 tone. socially efficient quantity for the a periods is 2*42 = 84 tone. so the No, 2) Ane! because the reduired amount for first period is 42 tone and there is already total lithium in lithium in reserve is 150 tone. need for any production or purchase for I period. So it does not have any user cost for for optimal efficient quantity for first period. so,