Please answer numer 2 In the figure below, Sai is the long-run domestic supply curve of oil without consideringthe climate change damages resulting from burning more oil, Sa is the domestic supplycurve that includes these per-unit damages. Imported foreign oil is reflected by threesupply curves: Pw1 reflects the observed world price, Pw2 includes a “vulnerabilitypremium" due to national security in addition to world price, and Pw3 adds in the per-unitclimate change damage due to consuming more imported oil.$/UnitDomestic Demandw3PwePw1А ВDConsumption2) In the absence of any correction for national security and climate changeconsiderations, does the market in general consume too much or too less importedoil compared to the efficient level? Why?

The long run supply curve is a graphical representation of the relationship between the price of a…

Answered: 2) In the absence of any correction for…

2) In the absence of any correction for national security and climate change considerations, does the market in general consume too much or too less imported oil compared to the efficient level? Why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please answer numer 2

In the figure below, Sai is the long-run domestic supply curve of oil without considering
the climate change damages resulting from burning more oil, Sa is the domestic supply
curve that includes these per-unit damages. Imported foreign oil is reflected by three
supply curves: Pw1 reflects the observed world price, Pw2 includes a “vulnerability
premium" due to national security in addition to world price, and Pw3 adds in the per-unit
climate change damage due to consuming more imported oil.
$/Unit
Domestic Demand
w3
Pwe
Pw1
А В
D
Consumption
2) In the absence of any correction for national security and climate change
considerations, does the market in general consume too much or too less imported
oil compared to the efficient level? Why?

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