The Demand and Supply Functions for Oil on the World

question 14

Essay

The demand and supply functions for oil on the world market are given as: and Calculate consumer surplus. If the Clinton Administration puts a price ceiling of $20 per unit, calculate the resulting consumer surplus. Are consumers better off?

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Definitions:

Break-Even Point

The point at which total costs and total revenue are equal, resulting in no net loss or gain and all fixed costs are covered.

Selling Price

The amount of money charged for a product or service, which can influence demand and revenue.

Contribution Margin Ratio

The ratio of contribution margin to sales revenue, used to measure the profitability and efficiency of a product or service.

Margin Of Safety

The difference between the actual or expected profitability of a project and the break-even point. It is a cushion against uncertainty.