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Let us consider the effects of the Emergency Petroleum Allocation Act (EPAA) on the domestic supply of crude oil.

6. Let us consider the effects of the Emergency Petroleum Allocation Act (EPAA) on the domestic supply of crude
oil. Assume the world price is 15, the price of old oil is set at 10, a domestic supplier is classified as a stripper if
and only if its production does not exceed 10, and the base production control level is 20. Derive the effect of
EPAA on the supply decision of a domestic supplier of crude oil when its marginal-cost curve is represented by:
a) MC(Q) = 5 + 2Q
b) MC(Q) = 5 + .75Q
c) MC(Q) = .02Q2
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