ConsiderFigure 14.3, which shows what a cartel can do if it can act as a monopolist. InFigure 14.3, the cartel supplies the entire world market.

1.What is the effect on the cartel's profit-maximizing price if a new outside source of supply now develops that can provide 10 million barrels of oil per day at any price above $5 per barrel? Show the effect using the graph. (Hint:With this new outside supply, what is the demand that remains for the cartel's oil?)

2.Instead of the new outside source described in questiona, consider instead a new outside source of supply that will provide amounts of oil that vary with the world price, according to the following schedule:

\fFIGURE 14.3 A Cartel as a Profit-Maximizing Monopoly Price [5 per barrel) Marginal-rmo cum {millions of barrels per day]: *Before subtracting any fixed costs