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Suppose market demand for oil is Q(P)=100–0.75P where Q is billions of barrels (BBL)or oil per year and P is price per barrel where,MC(Q)=3Q There is a total of 100 BBL of oil available to use in periods 0 (current year) and 1 (next year). Assume the interest rate is 5%. What is the revenue-maximizing quantities of oil to extract in each period? What are the corresponding prices? What is the CS, PS, SW in each period? Show that this solution maximizes social welfare.

Suppose market demand for oil is Q(P)=100–0.75P where Q is billions of barrels (BBL)or oil per year and P is price per barrel where,MC(Q)=3Q There is a total of 100 BBL of oil available to use in periods 0 (current year) and 1 (next year). Assume the interest rate is 5%. What is the revenue-maximizing quantities of oil to extract in each period? What are the corresponding prices? What is the CS, PS, SW in each period? Show that this solution maximizes social welfare.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose market demand for oil is Q(P)=100–0.75P where Q is billions of barrels (BBL)or oil per year and P is price per barrel where,MC(Q)=3Q There is a total of 100 BBL of oil available to use in periods 0 (current year) and 1 (next year). Assume the interest rate is 5%. What is the revenue-maximizing quantities of oil to extract in each period? What are the corresponding prices? What is the CS, PS, SW in each period? Show that this solution maximizes social welfare. Chegg has already the answer of this question, but it is wrong, can you please explain the maths. Thank you
Transcribed Image Text:Suppose market demand for oil is Q(P)=100–0.75P where Q is billions of barrels (BBL)or oil per year and P is price per barrel where,MC(Q)=3Q There is a total of 100 BBL of oil available to use in periods 0 (current year) and 1 (next year). Assume the interest rate is 5%. What is the revenue-maximizing quantities of oil to extract in each period? What are the corresponding prices? What is the CS, PS, SW in each period? Show that this solution maximizes social welfare. Chegg has already the answer of this question, but it is wrong, can you please explain the maths. Thank you
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