QD 1⁄4 70,000 2,000P
12.10 Suppose that the total market demand for crude oil is given by
QD 1⁄4 70,000 2,000P
where QD is the quantity of oil in thousands of barrels per year and P is the dollar price per barrel. Suppose also that there are 1,000 identical small producers of crude oil, each with marginal costs given by
MC 1⁄4 q þ 5
where q is the output of the typical firm.
a. Assuming that each small oil producer acts as a
price taker, calculate the typical firm’s supply curve (q 1⁄4 ...), the market supply curve (QS 1⁄4 ...), and the market equilibrium price and quantity (where QD 1⁄4 QS).
Answers: 3
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12.10 Suppose that the total market demand for crude oil is given by
QD 1⁄4 70,000 2,000P
QD 1⁄4 70,000 2,000P
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