Exhaustible Resources

Sebasti

Exhaustible Resources
In a 2-period economy, the initial stock of an exhaustible resource is given with S0 = 20,000. The marginal propensity to pay is given by:
mpp(xt) = 10 - xt/2000
The costs of supply are c = 1. The social discount rate is given by r = 0.1.

Calculate the optimal extraction of the resource and the corresponding market prices.

Thanks for your help.