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The Sea Shell oil company is pumping oil at a field off the coast of Nigeria. The Sea Shell oil company has plans to extract
The Sea Shell oil company is pumping oil at a field off the coast of Nigeria. The Sea Shell oil company has plans to extract 180 million barrels for the next two years. The production benefits and costs are: MB = 80 0.2Q MC = 20 + 0.1Q Q is in millions of tons. Part (a) Calculate the simplified equation for net marginal benefits (NMB), using the equations used for MB and MC above. Part (b) What is the profit maximizing quantity the firm should extract in year 1 and year 2? Consider year 1 as the beginning of time (t = 0) and year 2 as the next year (t = 1). Assume a discount rate of 10% for each year
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