For parts (a) and (b) use the supply and demand model and graph to predict the impact of each event on the equilibrium price and quantity in the market for oil.

a)Assuming that the Paris climate agreement would have lowered overall consumption of oil in the U.S., what is the effect of the U.S. pulling out of the agreement on the future oil market?

b)What is the impact of a significant reduction in production costs of both oil and natural gas (an oil substitute) in the U.S?

The current price of oil is $50 per barrel and production is 100 million barrels of oil per day.

c). Given that the elasticity of demand for oil is = 0.7 and OPEC is the only major supplier to the market for oil, how much would OPEC have to reduce production by in order for the market price to increase to $55?

Now assume that there is a significant number of producers in the U.S. that can increase their supply when it is profitable by increasing capacity of shale oil. A typical location of shale oil production in the U.S. has a daily cost function of () = 6,760 + (1/10)q 2where Q is daily production in barrels of oil.

d)Given the current price of $50, how many barrels per day would a shale oil location in the U.S. produce to maximize profits?

e)Given the price goal of OPEC of $55 per barrel, how many barrels per day would a shale oil location in the U.S. produce to maximize profits?