1) Suppose that the total market demand for crude oil is given by QD = 70,000 2, 000P where Qp is the quantity of oil in thousands of barrels per year and P is the dollar price per barrel. Suppose also that there are 1,000 identical small producers of crude oil, each with marginal costs given by MC =q+5 where q is the output of the typical firm. "Ref: BB 550-553, Notes L33) a) Assuming that each small oil producer acts as a price taker, calculate the typical firms supply curve (ie. q = .. .), the market supply curve (ie. Qs = ...), and the market equilibrium price and quantity, Q and P. b) Suppose a practically infinite source of crude oil is discovered under the Beehive (it means the government has to shift to the Chatham Islands, which much to their surprise, many think is a good idea. An added bonus is that New Zealanders also understand why politicians seem to be so slick at avoiding responsibility). This turns Wellington City into a would-be price leader and that this oil can be produced at a constant average and marginal cost of AC = M/C = 15 per barrel. Assume also that the supply behaviour of the competitive fringe described in a) is unchanged by this discovery. Calculate the demand curve for oil facing Wellington City. c) Assuming that Wellington City's marginal revenue curve is given by MR =25 - Q 1, 500 how much should Wellington produce in order to maximise profits? What price and quantity will now prevail in the market for crude oil?3) Suppose that Brie L.s Brie-and-Red-Pepper Gourmet Shoppe has daily fixed costs of $1,000, and its marginal cost curve is given by MC = 15. Also suppose that it produces a differentiated product in a monopolistically competitive industry alongside lots of firms like it. Suppose that it faces the firm demand curve: Q = (100, 000/N)(20.5 - P) which gives an inverse demand curve of, N P = 20.5 - 100, 000 Q Total revenue is given by P x Q or, TR = 20.5 - N 100, 000 * Q) x Q [Ref: BB 562-567, Notes [.35) a) Assume that there are currently / = 1,000 different firms producing cheeses. This means that Brie L.s Brie-and-Red-Pepper Gourmet Shoppe faces a marginal revenue curve equal to, MR = 20.5 0.02Q What is the profit-maximising price and quantity for Brie L.s Brie-and-Red-Pepper Gourmet Shoppe? How much money does the firm make? Explain your answers. b) Do you think the situation in the industry is stable