Suppose biofuels were available in infinite supply at a price of $30 per unit of oil-equivalent....
Fantastic news! We've Found the answer you've been seeking!
Question:
![Suppose biofuels were available in infinite supply at a price of $30 per unit of oil-equivalent. Inverse](https://dsd5zvtm8ll6.cloudfront.net/si.experts.images/questions/2023/06/647b1eae50359_1685790362785.jpg)
Transcribed Image Text:
Suppose biofuels were available in infinite supply at a price of $30 per unit of oil-equivalent. Inverse demand for oil in a competitive market is P=70-5Q, where Q is billions of barrels (BBL) of oil per year and P is price per barrel. The marginal cost of extracting the oil is zero. There is a total of 13 BBL of oil available to use in periods 0 and 1. Assume the interest rate is 6%. Answer the following questions using the information above. a. Find the social welfare maximizing prices for periods 0 and 1 when there is a backstop technology, State the equimarginal principle that you used to find the revenue- maximizing solution. Round your answers to two decimal places. (Hint: compare the present value price of the backstop technology with the present value price without the backstop technology to find P, and P₁.) (Hint 2: you have already found the future value price without the backstop technology in question 2.) b. What are the corresponding quantities in each period? Refer to part a. How much of the biofuel will be produced? Round your answers to two decimal places. Suppose biofuels were available in infinite supply at a price of $30 per unit of oil-equivalent. Inverse demand for oil in a competitive market is P=70-5Q, where Q is billions of barrels (BBL) of oil per year and P is price per barrel. The marginal cost of extracting the oil is zero. There is a total of 13 BBL of oil available to use in periods 0 and 1. Assume the interest rate is 6%. Answer the following questions using the information above. a. Find the social welfare maximizing prices for periods 0 and 1 when there is a backstop technology, State the equimarginal principle that you used to find the revenue- maximizing solution. Round your answers to two decimal places. (Hint: compare the present value price of the backstop technology with the present value price without the backstop technology to find P, and P₁.) (Hint 2: you have already found the future value price without the backstop technology in question 2.) b. What are the corresponding quantities in each period? Refer to part a. How much of the biofuel will be produced? Round your answers to two decimal places.
Expert Answer:
Answer rating: 100% (QA)
Here are the stepbystep calculations a Equimarginal principle Set ... View the full answer
Related Book For
Intermediate Microeconomics and Its Application
ISBN: 978-0324599107
11th edition
Authors: walter nicholson, christopher snyder
Posted Date:
Students also viewed these accounting questions
-
Assume that you have just been hired as business manager of Campus Deli (CD), which is located adjacent to the campus. Sales were $1,100,000 last year, variable costs were 60% of sales, and fixed...
-
The Miss Manners Refinery in Dry Rock, Oklahoma, converts crude oil into gasoline. It takes 1 barrel of crude oil to produce 1 barrel of gasoline. In addition to the cost of oil there are some other...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Murray Company has provided the following partial comparative balance sheets and the income statement for 2010. Required: Compute operating cash flows by using the indirectmethod. Murray Company...
-
An automatic speed control system will be necessary for passenger cars traveling on the automatic highways of the future. A model of a feedback speed control system for a standard vehicle is shown in...
-
Calculate the pressure drop in \(\mathrm{kPa}\) from the head of clear liquid.
-
Using the PewSocialMedia dataset, run a regression to analyze the relationship between community type (use the recoded community reference group variables) and the respondents score on the Index of...
-
Overview The milestone for Project One involves applying accounting principles and methods to long-term liabilities and equity. You will also evaluate these financial statement components for...
-
Which of the following correctly identifies normal balances of accounts? Assets Liabilities Common Stock Revenues Expenses Debit Credit Credit Debit Credit Assets Liabilities Common Stock Revenues...
-
The COVID-19 pandemic affected companies in the food industry in unique ways, particularly during 2020. Ruth's Hospitality Group (Ticker: RUTH) develops and operates fine dining restaurants under the...
-
The rectangular cistern (storage tank for rainwater) shown has its Ground level top 5 ft below ground level. The cistern, currently full, is to be emptied for inspection by pumping its contents to...
-
Using the Central Limit Theorem. In Exercises 5-8, assume that the amounts of weight that male college students gain during their freshman year are normally distributed with a mean of 1.2 kg and a...
-
Swain Athletic Gear (SAG) operates six retail outlets in a large Midwest city. One is in the center of the city on Cornwall Street and the others are scattered around the perimeter of the city....
-
Please help Calculating NPV and IRR Businesses use NPV and IRR to determine whether a project will add - value for shareholders. After watching the CFA Level I Corporate Finance video, answer the...
-
Assume that John wants to annuitize the annuity and is told that he can receive a straight life annuity for $600 a month for life. If the actuarial number of payments is 300, how much of the first...
-
An epidemiologist plans to conduct a survey to estimate the percentage of women who give birth. How many women must be surveyed in order to be 90% confident that the estimated percentage is in error...
-
Which version of a project's payback period should the CFO use when evaluating Project Sigma, given its theoretical superiority? The regular payback period The discounted payback period One...
-
Why are stocks usually more risky than bonds?
-
A common utility function used to illustrate economic examples is the Cobb-Douglas function where U(X, Y) = X Y where and are decimal exponents that sum to 1.0 (that is, for example, 0.3 and 0.7)....
-
This problem involves solving demand and supply equations together to determine price and quantity. a. Consider a demand curve of the form QD = 2P + 20 Where QD is the quantity demanded of a good and...
-
Although we only discussed profit maximization as a goal of firms in this chapter, many of the tools developed can be used to illustrate other goals as well. To do so, assume a firm faces a...
-
Discuss the role that investing plays in the personal financial planning process and identify several different investment objectives.
-
Distinguish between primary and secondary markets as well as between broker and dealer markets.
-
CALCULATE AN OUNT TO IN EST TO NEET 03- C 15. Use Worksheet 11.1. Mary Bender is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App