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# PS1 - UNIVERSITY OF SOUTHERN CALIFORNIA Marshall School of...

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UNIVERSITY OF SOUTHERN CALIFORNIA Marshall School of Business FBE 462 – International Trade – Spring 2010 Problem Set #1 Due January 28 1. In 2000, the demand and supply of oil in the United States are given by: Demand: P = 92 – 10 Q D Supply: P = 0.5 + 8.5 Q S where the quantity Q is in billions of barrels the price P is in dollars per barrel. a. With free trade and an international price of \$26 per barrel, how much oil does the United States produce domestically? How much does it consume? Show the demand and supply curves on a graph and label these points. Indicate on the graph the quantity of U.S. imports of oil. b. If the United States stops all imports of oil (in a way that allows enough time for orderly adjustments as shown by the equations), how much oil would be produced in the United States? What would be the price of oil in the United States with no oil imports? Show all of this in your graph. c. If the United States stops all oil imports, which group(s) in the United States would gain? Which groups would lose? As appropriate, refer to your graph in your answer.

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PS1 - UNIVERSITY OF SOUTHERN CALIFORNIA Marshall School of...

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