Economics 10b Study Guide - Final Guide: Utility, Bellman Equation, Partial Derivative

• School: Harvard University
• Department: Economics
• Course: Economics 10b
• Professor: All

Document Summary

Please use a separate blue book for each question and write the. Question number on the front of the blue book. Please put your exam number on each book. Please do not write your name on your blue books. Assume that the price of oil, p, is arithmetic brownian motion: Suppose that you own an oil field a geological formation that contains oil dp adt dz deposits. You can"t sell the oil field, but you can decide how much oil to pump every instant of time. You choose an instantaneous oil flow of f(t) units per period, where. For this problem you are allowed to adjust the oil flow as often as you want and you are allowed to restart the flow even if the flow was previously set to zero. F(t)*(p(t) - c), where p(t) is the per unit price and c is the (non-stochastic) per unit extraction cost.