Venezuela has announced plans to allow limited re-entry of foreign oil firms to its territory. It will auction mineral rights for a small oil field recently discovered near Paradise Falls. Exxon-Mobil has asked you to analyze the potential for the investment. Total reserves of the oil field are 10 million barrels. The winner of the auction will have two years to extract oil from the field before it reverts back to the control of PDVSA, the state-owned Venezuelan oil company. Engineers have estimated the following total cost function for production at this remote site: T Ct = 30 10Qt Q2 t where T Ct is the total cost (in millions of dollars) in year t and Qt is the oil production (in millions of barrels) in year t. For example, if production at the site in Year 1 is 2 million barrels, then the total cost in Year 1 will be $54 million dollars (30 10 2 22 = 54). The implied marginal cost of production is M Ct = 10 2Qt All oil produced must be sold to PDVSA. The price that PDVSA will pay is fixed at $65/bar- rel in Year 1 and $80/barrel in Year 2