Question: The OPEC cartel is trying to determine the total amount of oil to sell on the world market. It estimates world demand for oil to

The OPEC cartel is trying to determine the total amount of oil to sell on the world market. It estimates world demand for oil to be QW = 103.33 - P/6, where QW denotes the quantity of oil (in millions of barrels per day) and P is price per barrel. OPEC’s economists also recognize the importance of non- OPEC oil supplies. These can be described by the estimated supply curve QS = .5P + 10.
a. Write down OPEC’s net demand curve.
b. OPEC’s marginal cost is estimated to be $20 per barrel. Determine OPEC’s profit-maximizing output and price. What quantity of oil is supplied by non-OPEC sources? What percentage of the world’s total oil supply comes from OPEC?

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a OPECs net demand curve is Q N Q W Q S 10333 P6 5P 10 9333 23... View full answer

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