Consider the problem of a mining firm, MondoMolybdenum, over two periods (0 and 1).

Consider the problem of a mining firm, MondoMolybdenum, over two periods (0 and 1). In a particular mine (the "MondoMine"), the firm has known reserves of X = 38 units of a mineral resource and must set extraction levels in each period (q0 and q1, respectively). The firm has contracted to sell any amount of minerals it can mine at P = 35 per unit in both periods. In period 0, MondoMolybdenum's marginal cost of extraction is MC0(q0) = 15 + q0. The firm plans to acquire new technology in period 1 that will change the firm's cost structure to MC1(q1) = 10 +