a. How many barrels of oil will the firm extract in the first year? million barrels b. Suppose the user cost increases by $20 at the beginning of the year. Using the graph above, show the effect of this increase in user cost for Slippery Slope Oil Company. Instructions: Use the tool provided 'Total cost¡' to draw the new total cost curve when the user cost increases by $20 (at any quantity extracted). Plot only the endpoints of the line (2 points total). c. Now how many barrels of oil will the firm extract? million barrels d. Suppose the optimal extraction quantity for Slippery Slope is 500 million barrels of oil. Assuming that Slippery Slope faces the higher total cost (Total cost1), at what price would Slippery Slope extract and sell this quantity? 2$

a. How many barrels of oil will the firm extract in the first year? million barrels b. Suppose the user cost increases by $20 at the beginning of the year. Using the graph above, show the effect of this increase in user cost for Slippery Slope Oil Company. Instructions: Use the tool provided 'Total cost¡' to draw the new total cost curve when the user cost increases by $20 (at any quantity extracted). Plot only the endpoints of the line (2 points total). c. Now how many barrels of oil will the firm extract? million barrels d. Suppose the optimal extraction quantity for Slippery Slope is 500 million barrels of oil. Assuming that Slippery Slope faces the higher total cost (Total cost1), at what price would Slippery Slope extract and sell this quantity? 2$

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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