Question: a. What is the initial equilibrium price based on the given data? Graph the solution to this answer. b. Now assume OPEC decides to decrease

a. What is the initial equilibrium price based on the given data? Graph the solution to this answer.

b. Now assume OPEC decides to decrease output of oil. If OPEC decreases oil output and this ultimately decreases gasoline supply at every price by 3 gallons (ceteris paribus), what will the new equilibrium price be? Illustrate this change in supply on your graph.

c. Now assume the government worries about OPEC’s impact on price. Assume the government decides to freeze the price at the initial equilibrium price ($3). What is the impact on the market? Fully explain your answer.

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