1. Saudi Arabia exports oil to the United States, while the U.S. also produces its own oil. After many years of normal trade, Saudi Arabia decides to impose a tax on the export. Please draw on a graph and describe in words the impacts of such a tax on the consumption level and domestic oil production in the United States. (7%) [Hint: there are two oil suppliers for the United States. You need to draw the market supply curve from these two supply curves. Then the supplier curve of Saudi Arabia's oil should be shifted when the tax is imposed, while that of U.S. domestic oil is not affected. The market demand curve remains unchanged after the tax.]

2. In a very arid (much evaporation, little rainfall) and remote (expensive water transportation from outside) region, local people use cement to pave their rooftops and yards to collect water into an underground tank (see the graph below). Please draw on a graph and describe in words the impacts of such a method on managing the local ground water and rainfall water resources. (6%) [Hint: Similar to the 1st question above, this case also involves two suppliers or water sources, being rainfall and ground water. The supplier curve of ground water remains unchanged, while the rainfall water collection system significantly reduces the marginal costs of utilizing rainfall water. The water demand curve is the same as before.]