Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 7A, Problem 2E
To determine
Effect on the optimal rate of extraction for a T oilfield due to low historic interest rates.
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Students have asked these similar questions
Suppose the Marginal Benefit and Marginal Cost for crude oil at any given period is:
MB = 159 - 2.1Q and MC=36 + 0.9Q
Where price is measured in dollars and quantity is measured in barrels. The total oil reserve is 50 tons.
What is the Optimal barrels of oil that should be extracted in the current period (suppose we don’t need to be concerned with any future periods)?
The world's total petroleum reserve is estimated at 1.5 x
1022 J. At the present rate of consumption, 6.027 x
1017 J/day, how long would it take to exhaust the
supply (in years)?
Given that the marginal cost of a ‘backstop’ (e.g. solar energy) is MCb per unit of an exhaustible resource, prove that the cost of the ‘backstop’ sets an upper limit on oil price and also determines the initial price of oil. (Hint:Utilize the expression pt = MC + (p0 − MC)(1 + r)t and consider T as theswitch date.)
Chapter 7A Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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