The break even price for drilling is 540: the solution to
EV=-160+.2*2*(P-140)=0. Working backward: P2=540, R2=400, Q2=200; R1=200,
P1=340, Q1=400. Total produced via exploration = 600 - 390 = 210.
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Peter J Wilcoxen, The Maxwell School, Syracuse University
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