Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 8, Problem 20PAA
To determine
To analyze U.S. steel market and effect on price change.
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Suppose that President Clinton has recently recommended that the U.S. should use some of the strategic oil reserves (oil stored underground and owned by the United States government) in order to solve the U.S. oil supply problem. Assume that quantity demanded in the short-run is inelastic at 1 million barrels per day. The quantity supplied (per day) is equal to 700,000 + 10,000P (where P is the price for a barrel of oil).
a. What would be the current price for a barrel of oil? N
b. If Clinton releases 100,000 barrels per day, what is the new equilibrium price and quantity? N
c. Presidential candidate George W. Bush proposed that all states lower their gasoline tax. Assume that the gasoline tax reduction leads to a $10 decrease in the tax on a barrel of oil (i.e., supply side). What is the new price and quantity? N How much of the tax savings will be passed on to consumer through lower prices? Assume that the changes in part b. have not occurred.
d. What impact do each of these two…
Suppose that President Clinton has recently recommended that the U.S. should use some of the strategic oil reserves (oil stored underground and owned by the United States government) in order to solve the U.S. oil supply problem. Assume that quantity demanded in the short-run is inelastic at 1 million barrels per day. The quantity supplied (per day) is equal to 700,000 + 10,000P (where P is the price for a barrel of oil).
a. What would be the current price for a barrel of oil? N
b. If Clinton releases 100,000 barrels per day, what is the new equilibrium price and quantity? N
c. Presidential candidate George W. Bush proposed that all states lower their gasoline tax. Assume that the gasoline tax reduction leads to a $10 decrease in the tax on a barrel of oil (i.e., supply side). What is the new price and quantity? N How much of the tax savings will be passed on to consumer through lower prices? Assume that the changes in part b. have not occurred.
d. What impact do each of these two…
The total/aggregate market demand for rubber erasers can be segmented into two components.
The first component is the demand for rubber erasers by art students. This demand is given by
Qa=10,000-250P. The second component is the demand for rubber erasers by all other
purchasers. This demand is given by Qo=15000-500P.
a) Draw the demand curve for art students, the demand curve for other purchasers and the
aggregate demand curve
b) Derive the algebraic expression for the aggregate demand curve.
c) If the equilibrium price is $20, determine the consumer surplus for art students.
Chapter 8 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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