Question
In: Economics
Suppose that Saudi Arabia lets other members of OPEC sell all the oil they want at...
Suppose that Saudi Arabia lets other members of OPEC sell all
the oil they want at the existing price which the Saudis set and
other members accept. The daily world demand for OPEC oil is given
by:
P = 88 – 2Q
where P is the price per barrel of oil and Q the total quantity of
OPEC oil (in millions of barrels per day). The supply function for
other members of OPEC who behave like a “competitive fringe” is
given by:
Qr = .6P
The Saudis’ cost of production of oil is given by:
TCs = 15Qs +20
where Qs is the daily output of oil produced by the Saudis.
Calculate the price that Saudi Arabia will set to maximize its own
profit. Also calculate the optimal output and profit of the Saudis.
Determine the output produced by other members of the OPEC as well
as the total market output.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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Suppose that the United States and Saudi Arabia can each produce two products, oil and personal...
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United States and Saudi Arabia can each produce two products, oil
and personal computers. The labor requirements per unit of output
are provided in the table below:
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Suppose that the United States and Saudi Arabia can each produce two products, oil and personal...
Suppose that the United States and Saudi Arabia can each
produce two products, oil and personal computers. The labor
requirements per unit of output are provided in the table
below.
Labor Requirements Per Unit of Output
United States
Saudi Arabia
Oil
10
8
Personal Computers
30
4
Calculate the labor and opportunity costs for each good,
and then compute each country’s absolute and comparative advantage.
Use the results to determine what good each country should export
and explain your reasoning
Suppose that the United States and Saudi Arabia can each produce two products, oil and personal...
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each produce two products, oil and personal computers. The labor
requirements per unit of output are provided in the table
below:
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