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In Example 9.1, we calculated the gains and losses from price controls on natural gas and found that there was a deadweight loss of $5.68
In Example 9.1, we calculated the gains and losses from price controls on natural gas and found that there was a deadweight loss of $5.68 billion. This calculation was based on a price of oil of $50 per barrel and utilized the following equations: Supply: QS 15.90 + 0.72PG + 0.05PO Demand: QD 0.02 - 1.8:\"G + 0.69P0 where Q3 and Q\" are the quantities supplied and demanded, each measured in trillion cubic feet (ch), PG is the price of natural gas in dollars per thousand cubic feet ($Imcf). and PO is the price of oil in dollars per barrel ($Ib). If the price of oil were $70.00 per barrel, what would be the free-market price of gas? With a $70.00 price of oil per barrel, the free-market price of gas would be $E| per thousand cubic foot. (Enter your response rounded to two decimal places.) How large a deadweight loss would result if the maximum allowable price of natural gas were $6.00 per thousand cubic feet? Deadweight loss if the price of natural gas were regulated to be $6.00 would be $E| billion. (Enter your response rounded to two decimal places.) What price of oil would yield a free-market price of natural gas of $6.00? The free-market price of natural gas would be $6.00 if the price of oil were $D. (Enter your response rounded to two decimal places.)
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