Oil is shipped from Alaska to California and Florida. It is also shipped from th

Question

Oil is shipped from Alaska to California and Florida. It is also shipped from the Persian Gulf to Florida and to Europe, and from the North Sea to Europe. Assume that the world market and the individual markets for oil are competitive and that a terrorism attach damages some oil fields in the Persian Gulf. Explain how this event will affect (Hint: Think about what it means for all the markets to be competitive):

a) The amount of oil shipped from Alaska to California and to Florida.
b) The amount of oil shipped from the Persian Gulf to Florida.
c) The amount of oil shipped from the North Sea to Europe.
d) The total amount of oil (from all sources) shipped to Florida and to Europe.

Explanation / Answer

a) Increase This is what is being done. It is more beneficial than potential oil terrorist attacks b) Decrease There is a new source for oil that is more beneficial to purchase (Alaska_ c) Increase There will be trade between the US and Europe as they see our oil to be a safer investement. d) no change The same amount of oil is needed in Europe and Florida, no matter what the price is rate lifesaver pls.

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