Use the Following to Answer Questions

question 37

Multiple Choice

Use the following to answer questions:
-(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal and fixed cost of producing crude oil equals zero. Suppose that the two firms are maximizing industry profit and splitting the profit evenly. If both firms engage in noncooperative behavior, the industry output will be _____ barrels, and the price of crude oil will be _____.

• A) 0; $160
• B) 80; $80
• C) 100; $60
• D) 160; $0

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Definitions:

Government Price Supports

Financial subsidies or regulation mechanisms employed by governments to maintain the market price of a commodity or service above market level.

Rationale

The underlying reason or logical basis for a decision, action, or belief, often used in argumentation or analysis.

Freedom To Farm Act

A law passed in 1996 that revamped 60 years of U.S. farm policy by ending price supports and acreage allotments for wheat, corn, barley, oats, sorghum, rye, cotton, and rice.

Subsidies

Financial assistance provided by the government to businesses or individuals, often to support industries or activities considered beneficial.