In drilling a new oil well in an existing oil field,the fact that output on existing wells is reduced means that
A)existing wells have negatively sloped marginal cost curves.
B)existing wells and new wells are owned by different people.
C)existing wells and new wells are owned by the same people.
D)there is a discrepancy between private and social marginal costs.

Question

Quizplus · Accepted Answer

The reduction in output from existing wells when a new well is drilled indicates that there are externalities involved, leading to a discrepancy between private and social marginal costs.

In Drilling a New Oil Well in an Existing Oil