Question

Suppose the (inverse) daily demand for oil is given by , where  denotes millions of barrels of oil and  is the price per barrel of oil.

The marginal private cost of extracting oil is given by . Oil extraction gives rise to environmental pollution, such that the marginal social cost of extracting oil is given by .

Suppose the (inverse) daily demand for oil is given by , where  denotes millions of barrels of oil and  is the price per barrel of oil.

The marginal private cost of extracting oil is given by . Oil extraction gives rise to environmental pollution, such that the marginal social cost of extracting oil is given by .

Answer 1

a)

In linear demand equation;

$Q=a-bp$ ,but

In inverse demand equation;

Find the value of p

Where; $P=(Q-a)/-b$

But;

$P=fQ$

(b);

Total revenue equals price,

$TR = P×Q.$

Multiply the inverse demand function by Q to derive the total revenue function:

$TR = (120 - .5Q) × Q = 120Q - 0.5Q².$