Question

A large offshore oil field has attracted the interest of many oil drillers. The oil field is not owned by​ anyone, and any firm that wants to drill for oil is free to do so. Any firm drilling for oil will be able to pump oil from the​ field, but as the number of drillers​ increases, the yield from each oil well decreases since they are all pumping from the same fixed stock of oil. The oil field is therefore a classic common property resource. The price of oil is ​$8282 per barrel. The private marginal cost of drilling and extracting oil from the oil field is MC​ = 3636 ​+ Q. The marginal social cost of extracting oil from the field is MSC​ = 4545 ​+ 1.21.2Q. In each case Q is the number of barrels of oil extracted in thousands of barrels per day. The socially efficient amount of oil to extract per day is nothing thousand barrels. ​(Enter your response as a real number rounded to two decimal​ places.) If entry to the oil field is​ unrestricted, the actual amount of oil that will be extracted per day is nothing thousand barrels. ​(Enter your response as a real number rounded to two decimal​ places.)

Answer 1

Answer:

private:

Q =  46

P =   82

social welfare

public

Q =  38.33

P  =  38.33

Explanation:

First, we solve for the marignal revenue  P = 82

Revenue P x Q = 82Q

Marignal revenue 82

Now, we solve for the socially efficent outcome and the unrestricted market:

marginal cost = 36  + Q

marginal revenue = marignal cost

86 = 36 + Q =  50 social cost

socially efficient:

Marignal cost 45 + 1.2Q

82 = 45  +  1.2Q

Q = (82-45)/1.2 = 30,83

If unrestricted:

Marginal cost =  36+ 1.2Q

marginal revenue = 82

Maximization prift:

Q ?  82 = 45 + 1.2 Q =  38.33

P 38.33