N4 In Example 9.1, we calculated the gains and losses from price controls on natural gas and found that there was a deadweight loss of $5.68 billion. This calculation was based on a price of oil of $50 per barrel and utilized the following equations:Supply: QS= 15.90 + 0.72PG + 0.05P.Demand: QD0.02 – 1.8PG + 0.69P.%3Dwhere Q and Qº are the quantities supplied and demanded, each measured in trillion cubic feet (Tcf), PG is the price of natural gas in dollars per thousand cubic feet ($/mcf), and Po is the price of oil in dollars per barrel ($/b).If the price of oil were $65.00 per barrel, what would be the free-market price of gas?With a $65.00 price of oil per barrel, the free-market price of gas would be $ 10.21 per thousand cubic foot. (Enter your response rounded to two decimal places.)How large a deadweight loss would result if the maximum allowable price of natural gas were $5.00 per thousand cubic feet?Deadweight loss if the price of natural gas were regulated to be $5.00 would be $billion. (Enter your response rounded to two decimal places.)

Answered: In Example 9.1. we calculated the gains…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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