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(Solution) - Example 2 9 page 54 analyzes the world oil market Using

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Example 2.9 (page 54) analyzes the world oil market. Using the data given in that example:
a. Show that the short-run demand and competitive supply curves are indeed given by
D ? 33.6 ? 0.020P
SC ? 18.05 ? 0.012P.
b. Show that the long-run demand and competitive supply curves are indeed given by
D ? 41.6 ? 0.120P
SC ? 13.3 ? 0.071P.
c. In Example 2.9 we examined the impact on price of a disruption of oil from Saudi Arabia. Suppose that instead of a decline in supply, OPEC production increases by 2 billion barrels per year (bb/yr) because the Saudis open large new oil fields. Calculate the effect of this increase in production on the supply of oil in both the short run and the long run.

 







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