Microeconomics Question US demand curve for gasoline is given by P = 1,000 - 10Q
ID: 1198610 • Letter: M
Question
Microeconomics Question
US demand curve for gasoline is given by P = 1,000 - 10Q, where P is the price and Q is the quantity demanded. There are two sources of gasoline supply. Domestic production and import. The supply curve for domestic production is P = 100 + 2Q_1, where P is the price and Q_1 is the domestic quantity supplied. The supply function for imports is P = 100 + 4Q_2, where Q_2 is the quantity supplied by the imports. Draw demand curve and domestic supply curve. Find market equilibrium price and quantity if import for gasoline is banned. Determine the consumer surplus in the gasoline market if the gasoline is banned. Determine the producer surplus in the same situation. Draw domestic supply curve, import supply curve, and the aggregate supply curve (domestic and import combined). If import were allowed, what would be the equilibrium price and quantity? Determine the consumer surplus when the gasoline import is permitted. Determine the producer surplus in the same situation. Who wins and who loses when the import is permitted, and by how much? How can you reconcile the conflicting interests of the free trade? Please suggest specific solutions.Explanation / Answer
Microeconomics Question US demand curve for gasoline is given by P = 1,000 - 10Q