D(P) = 500 - 20P. Further assume that domestic oil refiners face a perfectly elastic supply of oil imports at a price
a) Derive the domestic price, the quantity processed by domestic oil refiners, and the amount of imports at the
competitive equilibrium. Now suppose that domestic crude oil suppliers face a price ceiling of 8. Further
suppose that for each two units of crude oil purchased, a domestic oil refiner gets one entitlement to domestic
b) Derive the marginal price of crude oil faced by domestic oil refiners.
c) Derive the effect of regulation on the amount of crude oil processed by domestic oil refiners and the amount
d) Derive the welfare effect of regulation on U.S. consumers and producers.
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