EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 9.8, Problem 2MQ
To determine
To ascertain: Consistency of supply elasticity estimate for natural gas with the fact that there has been discovery of new technology such as hydraulic fracturing which has reduced the price of natural gas.
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Enabling Assessment - Demand Estimation and Forecasting
Given: The ATV Company produces a specialty cement used in the construction of roads. ATV is a price-setting firm and estimates the demand for its cement using a demand function in the linear form:
Q = f (P, M, PR)
where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. The manager of ATV obtained the following results in her attempt to estimate the demand for cement in the succeeding months. The results are presented below:
DEPENDENT VARIABLE
Qc
R- SQUARE
F-RATIO
P-VALUE ON F
OBSERVATIONS
64
0.8093
84.872
0.0001
VARIABLE
PARAMETER ESTIMATE
STANDARD ERROR
T-RATIO
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8.20
4.01…
Along with many other producers, you own a small oil well. The market is very competitive. Themarginal extraction cost is $10 per barrel. The interest rate is 5%. The annual demand for oil isQ = 90,000 – 2,000P where Q is in barrels per year and P is in dollars per barrel.Use your knowledge about Hotelling’s Rule to answer the following questions:
Oil is trading for $25/bbl on Jan 1st, 1999. What do you expect the path of oil pricesand extraction quantities to be from 1999-2010 (assuming no shocks to the market)?A day later, on Jan 2nd, 1999, the Wall Street Journal opens with a story that there is now amore reliable reserves estimate. Total reserves are estimated at 760,000 barrels.
b. What is the oil price directly after this news becomes public? When will the worldrun out of oil, assuming no more oil is discovered? [Hint: use a spreadsheet.]You have a couple million dollars to spend on Dec 31st, 1999. You decide to quickly buy out allsmall oil producers. By Jan 1st, 2000, you are…
Along with many other producers, you own a small oil well. The market is very competitive. Themarginal extraction cost is $10 per barrel. The interest rate is 5%. The annual demand for oil isQ = 90,000 – 2,000P where Q is in barrels per year and P is in dollars per barrel.Use your knowledge about Hotelling’s Rule to answer the following questions:
Oil is trading for $25/bbl on Jan 1st, 1999. What do you expect the path of oil pricesand extraction quantities to be from 1999-2010 (assuming no shocks to the market)?A day later, on Jan 2nd, 1999, the Wall Street Journal opens with a story that there is now amore reliable reserves estimate. Total reserves are estimated at 760,000 barrels.
Chapter 9 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 9.2 - Prob. 1MQCh. 9.2 - Prob. 2MQCh. 9.2 - Prob. 1TTACh. 9.2 - Prob. 2TTACh. 9.4 - Prob. 1MQCh. 9.4 - Prob. 2MQCh. 9.5 - Prob. 1MQCh. 9.5 - Prob. 2MQCh. 9.8 - Prob. 1MQCh. 9.8 - Prob. 2MQ
Ch. 9.8 - Prob. 1TTACh. 9.8 - Prob. 2TTACh. 9.9 - Prob. 1MQCh. 9.9 - Prob. 2MQCh. 9.9 - Prob. 1TTACh. 9.9 - Prob. 2TTACh. 9.10 - Prob. 1MQCh. 9.10 - Prob. 2MQCh. 9.10 - Prob. 1TTACh. 9.10 - Prob. 2TTACh. 9.10 - Prob. 1.1MQCh. 9.10 - Prob. 2.1MQCh. 9.10 - Prob. 3.1MQCh. 9.10 - Prob. 1.1TTACh. 9.10 - Prob. 2.1TTACh. 9.10 - Prob. 1.2MQCh. 9.10 - Prob. 2.2MQCh. 9.10 - Prob. 3.2MQCh. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQCh. 9 - Prob. 9.1PCh. 9 - Prob. 9.2PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Prob. 9.7PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Prob. 9.10P
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