Q. Assume which the demand for crude oil is given by:
Q = -2000P + 70,000
where Q is the quantity of oil in thousands of barrels per yr also P is the dollar price per barrel. Assume also which there are 1000 identical small producers of crude oil, each with marginal costs given by:
MC = q + 5
where q is the output of the typical firm.

(a) Assuming which each small producer acts as a price taker, Compute the market supply curve also the market equilibrium price also quantity.

(b) Assume a practically infinite supply of crude oil is discovered in New Jersey by a would-be price leader also which this oil can be produced at a constant average also marginal cost of $15 per barrel. Assuming which the supply behavior of the competitive fringe Elucidated in part (a) is not changed by the discovery, Elucidate how much should the price leader produce in order to maximize profits? Illustrate what price also quantity will now prevail in the market?

(c) Sketch the demand curve. Does consumer surplus increase as a result of the New Jersey oil discovery? Elucidate how does consumer surplus after the discovery compare to Illustrate what would exist if the New Jersey oil were supplied competitively?