Oil deposits are often considered a common resource.If this is true, then for a group of land owners over an oil pool:
A)oil pools are an excludable good
B)each land owner has an incentive to extract as much oil as they can, without considering the effect on other land-owners
C)oil extraction should be subsidised
D)all of the above are true

Question

Quizplus · Accepted Answer

Oil deposits may be considered a common resource, which means that they are non-excludable and rivalrous. However, each landowner has exclusive rights to the oil beneath their land, so oil pools are excludable goods in this situation. Each landowner has an incentive to extract as much oil as they can, without considering the effect on other landowners, resulting in over-extraction and depletion of the oil pool. Subsidising oil extraction would not be a solution to this problem.

Oil Deposits Are Often Considered a Common Resource