imagine that two oil companies, bq and exxoff, own adjacent oil fields. under the fields is a common pool of oil worth $144 million. drilling a well to recover oil costs $5 million per well. if each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). assume that having x percent of the total wells means that a company will collect x percent of the total revenue. if bq were to drill a second well, what would its profit be if exxoff did not drill a second well?

Question

contestada

Respuesta :

anthougo anthougo · Answer 1 · 2022-12-19T21:55:25+01:00

If BQ were to drill a second well, its profit would be $86 million, if Exxoff did not drill a second well.

The profit is the difference between the revenue generated from the oil drill and the cost of drilling.

The revenues and costs are based on the percentage share of the total wells.

Value of shared pool of oil = $144 million

Cost of drilling a well = $5 million

Percent of total wells = x and x percent of the total revenue

The number of wells drilled by BQ = 2

The number of wells drilled by Exxoff = 1

BQ share of revenue = $96 million (2/3 x $144 million)

Drilling costs = $10 million (2 x $5 million)

Profit = $86 million ($96 - $10)

Exxoff share of revenue = $48 million (1/3 x $144 million)

Drilling costs = $5 million (1 x $5 million)

Profit = $43 million ($48 - $5)

Learn more about determining the profit at https://brainly.com/question/29785281

#SPJ1