Question

1. Suppose the total social benefit (B) from drilling into an oil field depends on the number of wells (W) according to B = $1,000,000∙W^0.5. If each well costs $100,000 per well, then what is:
   1. The equilibrium number of wells drilled if the oil field is common property
   2. The social surplus generated at equilibrium if the oil field is common property.
   3. The efficient number of oil wells for the oil field?
   4. The social surplus generated by the efficient number of oil wells.
   5. The price that a private owner would charge if they owned the oil reservoir.

Answer 1