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, Sa2 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 Pw2 Pw1 А В Consumption 1) In the absence of any correction for national security and climate change considerations, identify the amount of oil produced domestically and the amount of oil (or market demand) imported from the rest of the world.
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, Sa2 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 Pw2 Pw1 А В Consumption 1) In the absence of any correction for national security and climate change considerations, identify the amount of oil produced domestically and the amount of oil (or market demand) imported from the rest of the world.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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, Sa2 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
Pw3
Pw2
Pw1
А В
D
Consumption
1) In the absence of any correction for national security and climate change
considerations, identify the amount of oil produced domestically and the amount
of oil (or market demand) imported from the rest of the world.
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