What quantity of oil will Joe wish to consume when oil extraction is not jointly decided on?

Joe and Matilda are two Texas landowners. Their plots share a border and an oil reservoir straddles Show more Joe and Matilda are two Texas landowners. Their plots share a border and an oil reservoir straddles the boundary. Each draws oil from the reservoir to sell on the crude oil market. Next year Joe is losing his land to an environmental group and they will turn it a wildlife preserve; he wants to get all the oil now. Matilda knows this. Though the market demand is the same for both owners their costs are different. Joes marginal net benefit for water is given by the curve MNBJoe: P = 24 Q/3 and Matildas marginal net benefit for water is given by the curve MNBMaddy: P = 16 Q/4. Notice that prices are in $/1000-Barrels and Q is in 1000-Barrels. There is an estimated 80000 Barrels left in the play. A) Plot the marginal net benefits for oil on a figure as shown above. Mark all axes intercepts and curves. Assume the width is 80 and have the curve MNBJoe intersect the Q-axis at point J and the curve MNBMaddy hit the Q-axis at point M. Determine the values of M and J (a.k.a. horizontal intercepts). B) In two sentences explain: What is marginal net benefit and why is it important to distinguish this concept from marginal benefits and marginal costs? C) What quantity of oil will Joe wish to consume when oil extraction is not jointly decided on? Similarly what quantity will Maddy try to consume in this situation? Is this feasible? Show calculations and explain in a sentence. D) If the two owners cooperate and decide oil supply should be split efficiently: i. What are the quantities Joe and Matilda consume at this price? Mark QJoe and QMaddy on the figure. ii. Mark the equilibrium price on the graph above and calculate the value. Explain what this value stands for. Show less

QUICK QUOTE

Approximately 250 words