Explain whether you should agree with your partner analysis

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Reference no: EM131020951

Older oil wells that produce fewer than 10 barrels of oil a day are called "stripper" wells. Suppose that you and a partner own a stripper well that can produce eight barrels of oil per day and you estimate that the marginal cost of producing another barrel of oil is $80. In making your calculation, you take into account the cost of labor, materials, and other inputs that increase when you produce more oil. Your partner looks over your calculation of marginal cost and says: "You forgot about that bank loan we received two years ago. If we take into account the amount we pay on that loan, it adds $10 per barrel to our marginal cost of production." Briefly explain whether you should agree with your partner's analysis.

Reference no: EM131020951

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