Copy of ps1 - EC314-Fall 2008 Problem Set 1 Matt Turner...

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EC314-Fall 2008 Problem Set 1 Matt Turner When you write up your answers, your goal should be to (1) be correct, and (2) convince your reader that your answer is correct. Answers which do not achieve these goals will not be awarded full credit. To accomplish the second objective, it is helpful if your work is legible and if all steps are presented, possibly with a line of explanation. Please STAPLE pages together so that we do not lose them. (This problem set updated: 10 October 2008) . Problems Textbook p26, problems p.26, #1,2,3,4,5,6. MT1. An infinitely long lasting economy requires G units of gasoline in each year, and would like to to acquire this gasoline in a way that minimizes the discount present value of atmospheric carbon emissions. The economy must choose the share s of gasoline that is to be produced corn (ethanol) and the share ( 1 - s ) produced from petroleum. Suppose that each unit of gasoline produced from petroleum results in one unit of carbon emissions, and one unit of gasoline produced from corn results in
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