Business, 18.03.2021 01:20 jagmeetcheema

Assume that there are only two countries that produce crude oil, Saudi Arabia and Venezuela, that they produce the same grade of crude oil. First we are going to pretend that there are "regulators" that force them to behave as if they were perfectly competitive firms, and second, we are going to allow them to join OPEC, which is therefore a monopoly, and jointly maximize profits. Assume that the inverse demand curve for crude oil in the global market is given by
P-300- 5QD
where Q is measured in million barrels per day
Saudi Arabia is the low cost producer, with total cost function given by
CSA (QSA) 500 2Q5A
Venezuela's cost function is
Cy(Qy) - 800 + 4Q
A. Assume that Saudi Arabia and Venezuela are the only two countries that produce crude oil in the world, and they are forced to behave competitively despite being a duopoly. Under this assumption, derive the market supply curve for crude oil. (Hint the market supply curve is the horizontal sum of the individual firm supply curves since we are assuming the firms behave competitively. To sum the MC curves horizontally, solve each for each country's Q as a function of its MC, then add up the Qs and solve for overall MC.
B. Again, assuming that regulators impose competitive behavior on the production and pricing of the two countries, what will be the price and total quantity of crude oil produced? (don't worry about allocating total production between the two countries) Put a box or highlight over each answer so the TAs can find them in your work.
C. Now assume that OPEC "gets teeth" and is able to set quotas that restrict production among its members. For simplicity, we will make the additional assumption (which was once almost fairly realistic, but no longer is) that because OPEC's production costs are so low compared to other countries, it isa monopoly producer. OPEC therefore faces the demand curve given at the beginning of the problem. OPEC wl behave as a monopoly and face the market demand curve, then it will allocate the total, joint production among the two countries so as to maximize joint profits. Find total crude oil a. b. c. production, the amount produced by each country, and the equilibrium price.
D. Under the OPEC regime, does Venezuela produce crude oil in the short run, in the long run?

Answers: 2

Show answers

Another question on Business

Business, 22.06.2019 00:00

Exercise 4-6 the following balances were taken from the books of alonzo corp. on december 31, 2017. interest revenue $86,000 accumulated depreciationâ€”equipment $40,000 cash 51,000 accumulated depreciationâ€”buildings 28,000 sales revenue 1,380,000 notes receivable 155,000 accounts receivable 150,000 selling expenses 194,000 prepaid insurance 20,000 accounts payable 170,000 sales returns and allowances 150,000 bonds payable 100,000 allowance for doubtful accounts 7,000 administrative and general expenses 97,000 sales discounts 45,000 accrued liabilities 32,000 land 100,000 interest expense 60,000 equipment 200,000 notes payable 100,000 buildings 140,000 loss from earthquake damage 150,000 cost of goods sold 621,000 common stock 500,000 retained earnings 21,000 assume the total effective tax rate on all items is 34%. prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year. (round earnings per share to 2 decimal places, e.g. 1.48.)

Answers: 2

Answer

Business, 22.06.2019 02:00

Alandowner and his neighbor purchased adjoining undeveloped lots. after both built homes on their respective lots, the landowner suggested to the neighbor that a common driveway be built where the two lots joined. the neighbor agreed. the landowner and the neighbor split the cost of constructing the driveway and entered into a written agreement to equally share the costs of its upkeep and maintenance. the agreement was recorded in the county recorder's office. two years later, the neighbor built a new driveway located entirely on his lot. the common driveway, which the landowner continued to use but which the neighbor no longer used, began to deteriorate. the landowner asked the neighbor for money to maintain the common driveway, but the neighbor refused to contribute. three years later, the neighbor conveyed his lot to a friend. the friend entered into possession and used only the driveway built by the neighbor. by this time, the common driveway had deteriorated badly and contained numerous potholes. the landowner asked the friend to pay half of what it would take to repair the common driveway. the friend refused. the landowner repaired the driveway and sued the friend for 50% of the cost of repairs. will the landowner prevail?

Answers: 2

Answer

Business, 22.06.2019 04:50

Steffi is reviewing various licenses and their uses. match the licenses to their respective uses. you are eligible to work within the state. you are eligible to sell limited investment securities. you are eligible to sell fixed income investment products. your compensation is fee based. section 6 section 7 section 63 section 65

Answers: 3

Answer

Business, 22.06.2019 05:30

Eliza works for a consumer agency educating young people about advertisements. instead of teaching students to carefully read advertisement claims, she encourages them to develop a strong sense of self and to keep their life goals and dreams separate from commercial products. why might eliza's advice make sense?

Answers: 2

Answer

You know the right answer?

Assume that there are only two countries that produce crude oil, Saudi Arabia and Venezuela, that th...

Questions