b} What is the surplus that accrues to Russia and other oil producers in (Equilibrium? Second, the EU oomiders a price ceiling on all oil imports denoted hry the red line. Assume no retaliation from oil producers. c] What is the deadweight loss from the price ceiling? Is it economically eiiicient to impose the price ceiling? d} What is the surplus that Russia and other producers receive?1 e} 'What is the surplus that the EL' receives when it imposes a price ceiling? Derive an inequality which descrilms when it is beneficial for the EU to impose a price ceiling. Third, comparative statics. i} Replicate the graph above without annotations. Draw a secomi demand curve so that the inequality you derived does not hold. Is your demand curve more or less elastic? 1|ill-"hat might induce the change in the elasticitv? g] Replicate the graph above a second time. Draw a second supply curve so that the inequality does not hold. Is the supply curve more or less elastic at equilibrium? What could induce the change in the eLasticity? In reality. the EU only considered a price ceiling on Russian oil. not all oil. h} What would the Law of One Price predict about where Russian oil will end up? Use this to comment on the eiiectivenews of an EU price ceiling on oil. 1 Geopolitics {pts} This question aslrs you to think through the logic of the European Union putting a price cap on Russian oil. To simplify. we assume that the EU produces no oil. Use the lahets provided to answer this question. For example. I would describe the Total Stu-plus es A+B+C+E+F+G. First: assume the equilibrium of the market is where supply meets demand. The price is P and the quantity is Q. a] What is the sin-plus that accrues to the EU in equilibrium?I 3 Hotelling and Peak Oil (4pts) Consider a multi-period Hotelling problem. Assume zero marginal extraction costs, a 10% real interest rate, and for each period, a demand curve of P. = 10-Q, where Q, is in billions of barrels per year and t goes from period 1 to some far off N. The total resource stock in the ground is 32 billion barrels. a) Assume a competitive market. What will the price of oil be in the period when oil runs out (call it period 7)? Hint: What is the highest possible price? b) Assuming that Hotelling's rule holds, how many periods will it be until the oil runs out? Work backwards from time T. c) Use Excel to determine the production and price paths from now year 2023 until 2035. Is there peak oil in this problem formulation? d) Provide a functional form that changes the demand curve over time so that oil will peak. Have demand increase as a function of time, just as it would with rising incomes. Plot production over time to show the peak. e) Let's build further on your model. Now suppose that in year 2025 we unexpectedly discover a new technology that yields another 20 billion barrels (such as a new fracking advance!). Plot production and prices over time. Do you still show a peak? f) Explain why this model you have developed may be an improvement over the Hubbert Curve. What is this model still missing