If the producer has monopoly power in the market whats his extraction plan?

An oil producer has 60 barrels of oil to extract and sell in two periods. Assume that the cost of pr Show more An oil producer has 60 barrels of oil to extract and sell in two periods. Assume that the cost of producing the 60 barrels of oil is $0.05/barrel. He will sell the oil either in period 0 and period 1. The demand curve in the two periods are P0 = 5 0.05Q0 in period 0 and P1 = 5 0.033Q1 in period 1. The discount rate is 10%. a) If the producer has monopoly power in the market whats his extraction plan? b) If the government levies 5% tax on the Hotelling rent in period 0 no tax in period 1 whats his extraction plan in this scenario? (hint: if tax rate is t% the agent taxed receives r(1-t) from revenue or taxing object r). c) If the government levies 5% tax on the Hotelling rent in both periods whats his extraction plan? Any surprised findings? Show less

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