Question 1: Consider the global market for crude oil Suppose ther exists a single crude oil producer. This producer has a supply function for crude oil given by:
P=0.25Q.
World demand for crude oil is given by:
P=150-0.5Q.
Suppose a global govenment imposes a price ceiling on the market requiring the price for oil to be less than $70/barrel.
a. If the crude oil producer acts as price-taking firm, what is the firm's change in producer surplus as a result of the price ceiling (relative to no policy)?