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Unformatted text preview: (b) Using the method of reduction to one variable, solve for the level of extraction in periods 0 an 1. (c) Verify that prices rise at less than the rate of interest. (d) Verify that the present value of marginal rent associated with the last unit of harvest in any period is constant across periods. 2. What does perfect foresight mean in the context of this problem. Why is this an important condition/assumption for this problem? 3. Draw four gures that correspond to gure 8.6 for this problem. Since this is a discrete problem with just two periods, instead of drawing a continuous price path, for example, just draw the two price points that you calculate. 1...
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- Winter '08