How to Calculate the Number of Barrels Produced Given the Cost of Oil
What is the current cost of oil per barrel?
The cost is currently $10 per barrel, but is rising at a rate of $1 per year.
What is the price of oil per barrel?
The price of oil remains constant at $30 per barrel.
How many barrels will the driller produce?
If the price of oil remains constant at $30 per barrel, the driller will produce...
Answer:
The driller will produce 20 barrels per year.
To determine the number of barrels the driller will produce, we need to calculate the difference between the cost and price of oil. The cost of oil is currently $10 per barrel and is rising at a rate of $1 per year. The price of oil remains constant at $30 per barrel.
Since the price of oil is higher than the cost, the driller will continue to produce barrels until the cost matches the price. We can calculate the number of years it will take for the cost to reach $30 per barrel by dividing the difference between the price and cost ($30 - $10 = $20) by the rate of increase ($1 per year).
Therefore, it will take 20 years for the cost to reach $30 per barrel. During this time, the driller will produce 20 barrels per year.