Question

Imagine you are the owner of a natural gas company. You can either extract as much of the resource as fast as possible or delay extraction until a future time. Projections indicate that the price of natural gas is expected to rise in the future. What would you do in the present?

Answer 1

Delay extraction to a future time

Step-by-step explanation:

The only principal reason why we venture into business is to make profits. While we are doing this, we are equally looking at options and scenarios that could grant us access to the maximum possible profit.

In clearer terms, we seem to take out the maximum profit we can from the business. Now, as we can see, there are two cases presented and we need to judge to know what to do.

Speculations have arrived that there might be an increase in the price of natural gas in the future. Hence, what is meant to happen is that we bottle up our production to a later time at which we are presented with the option to maximize our profits.

Answer 2

Answer: Extract as much gas as possible now.

Step-by-step explanation:

As the owner of a natural gas exploring company with the ability to drill and export gas, if I receive information of a coming price increase in the market for gas, I would rapidly increase gas exploration to increase amount of gas that I can legally send to the market.