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Author Question: By the year 2025 the percentage of elderly in the U.S. should constitute nearly 10 of the ... (Read 12 times)

sdfghj

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on: Jul 1, 2018
By the year 2025 the percentage of elderly in the U.S. should constitute nearly 10 of the population.
 
  Indicate whether the statement is true or false

Question 2

Your aunt owns a gold mine. The marginal extraction cost of gold is 25 and remains constant over time. The current market price of a unit of gold is 200. Your aunt's appropriate discount rate is 12.
 
  Next year, your aunt expects the price of a unit of gold to be 222. Should your aunt extract any gold from the mine this year?


Anonymous

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

F

Answer to Question 2

No, she should not extract and sell any gold currently. This is because the return on the gold left in the mine exceeds her discount rate. That is,
(Pt+1 - c) > (1 + r)( Pt - c)  (222 - 25 ) > (1.12 )(200 - 25 ).


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