![]() ![]() The Agriculture Department argues that the subsidy increases the "cost" of planting and that it will reduce supply and increase the price of competitively produced agricultural goods. ![]() If the United States stopped all oil imports, which group(s) in the United States would gain? Which group(s) would lose? As appropriate, refer to your graph in your answer.In an effort to "support" the price of some agricultural goods, the Department of Agriculture pays farmers a subsidy in cash for every acre that they leave unplanted. If the United States stopped all imports of oil (in a way that allowed enough time for orderly adjustments as shown by the equations), how much oil would be produced in the United States? How much would be consumed? What would be the price of oil in the United States with no oil imports? Show all of this on your graph.Ĭ. Indicate on the graph the quantity of U.S. ![]() With free trade and an international price of $100 per barrel, how much oil does the United States produce domestically? How much does it consume? Show the demand and supply curves on a graph and label these points. Where quantity Q is in billions of barrels per year and price P is in dollars per barrel.Ī. consumers and producers of oil, and we perhaps are optimistic about how much adjustment is possible, then the following two equations show domestic demand and supply conditions in the United States: But perhaps the United States could gain if it gradually restricted and then ended oil imports in an orderly transition. ![]() If the United States stopped all oil imports suddenly, it would be very disruptive. After all, the United States can produce its own oil (or other energy products that substitute for oil). Perhaps it would be better for the United States if it could end the billions of dollars of payments to foreigners by not importing this oil. In 2012, the United States imported about 3.1 billion barrels of oil. ![]()
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