Suppose that a country imports 3 billion barrels of crude oil per year and domestic-ally produces another 3 billion barrels of crude oil per year. The world price of crude oil is $72 per barrel. Assuming linear demand and supply schedules, economists estimate the price elasticity of domestic supply to be 0.25 and the price elasticity of domestic demand to be -0.10 at the current equilibrium. a. Consider the changes in social surplus that would result om imposition of a $24 per barrel import fee on all crude oil imported into the country. Assume that the world price will not change as a result of this import fee, but that the domestic price will increase by $24 per barrel. Also assume that only producers, consumers, and taxpayers within the country have standing and that there will be an annual administrative cost of $200 million to impose and collect the new import fee. Using the information above regarding the current equilibrium price and quantity as well as the elasticity estimates, calculate the new total equilibrium quantity of crude oil demanded based on the import fee. (4 points) . Using the total equilibrium quantity om part a., nd the amount of that total quantity that will be produced and supplied by domestic producers and the amount of the total quantity imported 'om foreign producers. (4 points) Using your calculations om parts a. and b., estimate the annual social net benets of the import fee by calculating the changes in consumer and producer surplus as well as changes in tax revenue. Does your estimate imply that the import fee should be implemented? Why? (3 points) . Economists have estimated that the marginal excess burden of taxation in the country is 0.25. Reestimate the social net benets assuming that 20 percent of the increase in producer surplus is realized as tax revenue under the existing tax system. In answering this question, assume that increases in tax revenues less the cost of administrating the import fee are used to reduce domestic taxes. (4 points) (Hint: The taxes revenue collected through import fee and producer surplus means less taxes needs to be collected using other distortionary taxes) Under the same setting as question I, assume that prior to the imposition of the import fee, the country annually consumed 900 million short tons of coal, all domestically mined, at a price of $66 per short ton. How would the CBA of the import fee change if, after imposition of the import fee, the following circumstances are assumed to result om energy consumers switching om crude oil to coal? a. Annual consumption of coal rises by 40 million short tons, but the price of coal remains unchanged. (2 points) b. Annual consumption of coal rises by 40 million short tons and the price of coal rises to $69 per short ton. In answering this question, assume that the prices of other goods, including coal, were not held constant in estimating the demand schedule for crude oil. (2 points) c. Annual consumption of coal rises by 40 million short tons and the price of coal rises to $69 per short ton. In answering this question, assume that the prices of other goods, including coal, were held constant in estimating the demand schedule for crude oil. Also assume that the demand schedule for coal is completely inelastic. (3 points) d. The market price of coal underestimates its marginal social cost by $15 per short ton because the coal mined in the country has a high sulfur content that produces smog when burned. In answering this question, assume that the annual consumption of coal rises by 40 million short tons, but the price of coal remains unchanged. (3 points)