Business, 19.03.2021 18:40 ri069027

Assume that there are only two countries that produce crude oil, Saudi Arabia and Venezuela, that they produce the same grade of crude oil. First we are going to pretend that there are "regulators" that force them to behave as if they were perfectly competitive firms, and second, we are going to allow them to join OPEC, which is therefore a monopoly, and jointly maximize profits. Assume that the inverse demand curve for crude oil in the global market is given by P= 300- 5QD where Q is measured in million barrels per day.

Saudi Arabia is the low cost producer, with total cost function given by

CSA (QSA)= 500 + 2Q^2SA Venezuela's cost function is

Cy (Qv)= 800 + 4Qv^2

Assume that Saudi Arabia and Venezuela are the only two countries that produce crude oil in the world, and they are forced to behave competitively despite being a duopoly. Under this assumption, derive the market supply curve for crude oil.

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