Question 2 (10 points; 4 minutes) Royal Dutch Shell is a profit-maximizing company that produces and sells oil. Last week, Shell announced it would immediately stop all offshore oil drilling in the Arctic, even though it had already spent $7 billion on the project. They stated that oil prices were expected to remain low and future drilling costs were expected to rise. Using economic terminology, explain Shell's decision to immediately stop Arctic drilling. In your answer, be sure to indicate whether the $7 billion already spent on the project is relevant to their decision. Question 3 (40 points; 18 minutes total) In Oregon, farms can grow apples or grapes. Grapes are used to make wine. There are hundreds of small farms growing grapes and producing wine. Assume the Oregon wine industry is perfectly competitive. a. (8 points) Initially, the Oregon wine industry was in long-run competitive equilibrium. Draw the relevant graphs below for the market and for the typical firm. Use subscripts 1" on your labels. b. (12 points) Oregon wine becomes much more popular with consumers. In the short run, what happens to the price of Oregon wine? To the market quantity? To the quantity produced by the typical firm? To the profit of the typical firm? Show the effects on your graph above, using subscripts "2" on your labels. c. (8 points) In the long run, what happens in the Oregon wine industry? Specify the effects on market price, market quantity, typical firm quantity, typical firm profit, and the number of firms. Show the effects on your graph above, using subscripts "3" on your labels