Supplementary Exercises > Demand, Supply and Markets

OPEC Price Increase

OPEC recently decided to reduce its production in order to raise world oil prices. Here are some rough characteristics of the current US oil market: What would be the effects of OPEC successfully raising the world price of oil to $30 per barrel? You may assume that the supply of imports remains perfectly elastic after the price change (that is, the supply of imports shifts up but remains flat).

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Peter J Wilcoxen, The Maxwell School, Syracuse University
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