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Mairoon Mairoon
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Posts: 850
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6 years ago
Suppose coal sells for $50 per ton and can be mined at a constant marginal cost of $20 per ton. Forecasters predict that the price of coal next year will be $55. If your marginal cost next year will still be $20 and the interest rate is 10%, do you sell coal today?
Textbook 
Microeconomics

Microeconomics


Edition: 6th
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Replies
wrote...
6 years ago
You are indifferent if coal prices rise (10% of 50 - 20) by $3. Since coal prices are expected to rise by $5, you will wait until next year.
Mairoon Author
wrote...
6 years ago
Perfect
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