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Author Question: As in all other competitive markets price equals marginal cost in a market for a scarce, ... (Read 51 times)

Arii_bell

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on: Jul 1, 2018
As in all other competitive markets price equals marginal cost in a market for a scarce, non-renewable resource that is traded in a competitive market.
 
  Indicate whether the statement is true or false

Question 2

Suppose an exhaustible resource can be sold only this period or in the next period. The marginal cost of extraction is constant and equal to 5. The current year price of the resource is 55, respectively. The interest rate is 10. What is the minimum next year price required to make the sale of the resource profitable next year?
 
  A) 55
  B) 60
  C) 65
  D) 75
Microeconomics ¦ Perloff ¦ 8th Edition
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tandmlomax84

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Reply #1 on: Jul 1, 2018
Answer to Question 1

False. Price exceeds marginal cost in those markets because owners of those resources receive a rent. It is a compensation for the ownership of this scarce resource.

Answer to Question 2

B


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