Scenario 17-2.
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.
-Refer to Scenario 17-2. If BQ and Exxoff are able to successfully collude to maximize their joint profits, BQ will earn
A) $43 million and Exxoff will earn $86 million.
B) $62 million and Exxoff will earn $62 million.
C) $67 million and Exxoff will earn $67 million.
D) $86 million and Exxoff will earn $43 million.
Correct Answer:
Verified
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