Many of the firms that were the first to use fracking techniques to produce oil were small.

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Many of the firms that were the first to use fracking techniques to produce oil were small. By 2018, though, many large oil companies, such as Chevron  and ExxonMobil, had begun using fracking techniques. An article in the Wall Street Journal quotes an industry analyst as arguing that “these bigger companies have the scale to build or finance infrastructure and secure the best equipment and supplies.” The article then notes, “The ‘bigger is better’ mantra has started pushing smaller operators toward a new era of consolidation in fracking.” Assuming that this analysis is correct, illustrate the cost situation in fracking by drawing a graph that contains the long-run average cost curve for a smaller oil firm and one for a large oil firm.

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Macroeconomics

ISBN: 9780135801741

8th Edition

Authors: Glenn Hubbard, Anthony Patrick O Brien

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