The Maxwell School
Syracuse University
Syracuse University
Suppose that a particular resource can be produced from either raw ore or by recycling. The marginal cost of production from raw ore is given by MEC = Qt where Qt is the total amount of ore extracted to date. The marginal cost of producing it from scrap is given by MRC = $120. In addition, producing the resource from raw ore causes an externality of $80 per unit but there is no externality associated with recycling.Consider allocating the resource over four periods where each period has a demand curve given by Pi = 200 – Qi. You may assume the interest rate is zero and that there is always plenty of scrap.