The Deepwater Horizon oil spill in 2010 released an estimated 4.9 million barrels of crude oil...

 

 

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The Deepwater Horizon oil spill in 2010 released an estimated 4.9 million barrels of crude oil into the Gulf of Mexico. The resulting damage to coastal areas was severe, with over 1,000 miles of coastline affected. The costs of cleanup for spills like this are carried by the companies responsible for the drilling operation. Suppose a similar spill occurred and that 350 miles of coastal marshes were contaminated. To clean the marshes, cleanup crews have to flush the affected areas with clean water and rake to remove oil. The company responsible for this spill has a local cleanup crew. This crew can clean 10 miles of marsh per week. It costs $850/day to operate the local cleanup crew. Extra cleanup crews can be brought in. These crews can also clean 10 miles of marsh per week. Each extra cleanup crew costs $20,000 to bring in and $1,200/day to operate. The company has been given 20 days to clean the affected area. If cleanup takes more than 20 days, a $10,000/day fine is assessed for each additional day of cleanup. Question 1: how many extra cleanup crews should be brought in to minimize the company's cleanup cost? Model your answer to this question using the 5-Step Method. Based on your model, how much will the cleanup cost the company? Question 2: examine the sensitivity to the rate at which crews can clean the coastal marshes. Consider both the optimal number of crews and the total cost to the company. Question 3: examine the sensitivity to the amount of the fine. Consider the number of days the company will take to clean up the spill and the total cost to the company. Question 4: the company feels that the amount of the fine is excessive. Assuming that the only purpose of the fine is to motivate the company to clean up the oil spill in a timely manner, is the fine excessive? The Deepwater Horizon oil spill in 2010 released an estimated 4.9 million barrels of crude oil into the Gulf of Mexico. The resulting damage to coastal areas was severe, with over 1,000 miles of coastline affected. The costs of cleanup for spills like this are carried by the companies responsible for the drilling operation. Suppose a similar spill occurred and that 350 miles of coastal marshes were contaminated. To clean the marshes, cleanup crews have to flush the affected areas with clean water and rake to remove oil. The company responsible for this spill has a local cleanup crew. This crew can clean 10 miles of marsh per week. It costs $850/day to operate the local cleanup crew. Extra cleanup crews can be brought in. These crews can also clean 10 miles of marsh per week. Each extra cleanup crew costs $20,000 to bring in and $1,200/day to operate. The company has been given 20 days to clean the affected area. If cleanup takes more than 20 days, a $10,000/day fine is assessed for each additional day of cleanup. Question 1: how many extra cleanup crews should be brought in to minimize the company's cleanup cost? Model your answer to this question using the 5-Step Method. Based on your model, how much will the cleanup cost the company? Question 2: examine the sensitivity to the rate at which crews can clean the coastal marshes. Consider both the optimal number of crews and the total cost to the company. Question 3: examine the sensitivity to the amount of the fine. Consider the number of days the company will take to clean up the spill and the total cost to the company. Question 4: the company feels that the amount of the fine is excessive. Assuming that the only purpose of the fine is to motivate the company to clean up the oil spill in a timely manner, is the fine excessive?

Answer rating: 100% (QA)

Answer to Question 1 using the 5Step Method Step 1 Understand the problem and identify the decision ... View the full answer