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EBF 200Introduction to Energy and Environmental EconomicsFinal Practice Problems Sketched SolutionsMultiple choice1
Problems1. Suppose the world demand schedule for oil is as follows:PriceperbarrelQuantitydemanded$5040$7530$12520There are two oil producing countries, A and B. Each willproduce either 10 or 20 barrels of oil. Assume they can producethis oil at zero cost.a.There are four possible outcomes: A produces 10 or 20 and Bproduces 10 or 20. Find each country’s profit for each ofthese possibilities.2
b. Suppose these countries choose the quantity of oil toproduce simultaneously and without consulting with oneanother. Show that each country will produce 20 barrels ofoil and each will earn a profit of $1,000.