Non-renewable Resources: Oil Extraction One of the country initiates to extract non-renewable resources, i.e. oil, askin

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Non Renewable Resources Oil Extraction One Of The Country Initiates To Extract Non Renewable Resources I E Oil Askin 1 (170.61 KiB) Viewed 54 times

Non-renewable Resources: Oil Extraction One of the country initiates to extract non-renewable resources, i.e. oil, asking you to analyze the optimum level of extracting of oil for multi periods (Period 0 and Period T). A demand function for oil is P = Ke-0.1 and you wish to maximize social welfare which is expressed as: T W = Ju(R)e-¹2t Subject to T S₂ = 5-R₁dt. P(0) = P₁, P₁=K 0' a. (5 points) State current-valued Hamiltonian for this problem! b. (10 points) Show Hotelling's rule and what does this result tell us! c. (5 points) Find the optimal time path for oil extraction (T)! d. (15 points) Find the optimal condition for oil royalty at initial condition (Po), at time t (Pt), and at terminal condition (PT)! e. (15 points) Find the optimum level of oil extraction at initial condition (Ro), at time t (Rt), and at terminal condition (RT)!