Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 14, Problem 2P
To determine
The reasons for some companies drilling for their own crude oil while the others buying for the same from the market.
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Students have asked these similar questions
(Table: Barrels of Oil) Refer to the table. The change in profit from producing the second barrel of oil is ________, and the marginal cost from producing the seventh barrel of oil is ________.
(Table: Demand Schedule for Whatchamacallits) Use Table: Demand Schedule of Whatchamacallits. The market for whatchamacallits consists of two
producers, Emma and Joshua. Each firm can produce whatchamacallits with no marginal cost or fixed cost. If industry output is 700, each firm's profits
will be
than they would be at the output of 500, which maximizes industry profit.
Table: Demand Schedule for Whatchamacallits
Quantity of
Whatchamacallits
Price of a
Whatchamacallit
$10
9
8
7
6
5
43
1
0
a. $150 less
O b. $150 more
O c. $200 more
O d. $200 less
Demanded
0
100
200
300
400
500
600
700
800
900
1,000
(NON-RENEWABLE RESOURCES)
The demand and supply functions for oil for the current generation (in million barrels) is:
Demand: Qd = 250 – 5P
Supply: Qs = 5P
a. Assume the current generation does not consider the future at all. Draw a supply and demand graph showing the equilibrium price (P) and quantity (Q) consumed by this generation showing clearly the numbers for P and Q.
b. Assume that the next generation will have the same demand. Supply for both generations is only 250 million barrels. Interest rate (r) is 5%. Calculate the efficient allocation of resources between the two generations.
c. Other things being equal, assume that the available oil supply is 200 million barrels. Calculate and graph the efficient allocation of resources been the two generations.
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