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(a) [5 points] An oil producer drills for oil on the high seas by renting oil rigs. Each rig rents for 1 rig-dollar. No other
(a)[5 points] An oil producer drills for oil on the high seas by renting oil rigs. Each rig rents for 1 rig-dollar. No other input is required for production. The production technology is linear and 1 additional oil rig can "produce" 10 units of oil. What is the cost function of the oil producer? Denote amount of oil produced byy.
(b)[5 points] Oil production harms nearby marine life. Each additional unit of oil produced causes an estimated environmental loss of 0.8 rig-dollars. What is the marginal social cost of oil production?
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