Only questions 3 and 4 Consider an industry that owns 50 tons of copper to be used for communications applications over

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Only questions 3 and 4
Consider an industry that owns 50 tons of copper to be used for
communications applications over two periods, years 0 and 1. Assume
that the cost of extraction is zero. The annual discount rate is 5
percent. The annual stationary demand curve for the copper is Q =
200 – ½ P, where Q is in tons and P is in dollars per ton.
1. How much copper would an efficient industry extract in years
0 and 1?
2. What would the equilibrium price be in each year?
3. Suppose the discount rate is 10 percent rather than 5
percent. How does that change the answer?
4. Suppose fiber optics, a perfect substitute for copper, will
become available at the beginning of year 1. The price of the fiber
optic material will effectively be zero. How much copper would the
efficient industry allocate to periods 0 and 1?