Question

7. In the gasoline industry, the fracking revolution reduced the cost (both marginal cost and average cost) of obtaining oil

0 0
Add a comment Improve this question Transcribed image text
Answer #1

If there is reduction in cost of extracting through fracking revolution, producers would be reluctant to extract more oil to earn more profit. It will shift the supply curve to its right from supply to new supply while demand curve remains the same reducing the price from P to P1 and output rises from Y to Y1.

Initial consumer surplus is area of triangle ABP while producer surplus is PBC.

New consumer surplus is area of triangle ADP1 while producer surplus is DEP1.

In total we can see from the size of triangle that there is rise in consumer and producer surplus in the market.

New Supply

Add a comment
Know the answer?
Add Answer to:
7. In the gasoline industry, the fracking revolution reduced the cost (both marginal cost and average...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT