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Question: As of 1982, there were 227,000 miles of pipeline in the USA, over which 537 billion ton-miles of ...
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Show transcribed image text As of 1982, there were 227,000 miles of pipeline in the USA, over which 537 billion ton-miles of natural gas, crude oil, petroleum products, coal slurry, and chemicals were shipped. Overall, in 1982, pipeline traffic represented 24% of the total ton-miles shipped. The shipment of each of these commodities through the pipeline network illustrates the nonuniform distribution of such products among different regions in the USA (a) Assume that there are two regions of the country: the oil-rich Southwest and the not-so-oil-rich rest of the country. Also, there are two goods: oil and "all other goods." Assuming that each region has a similar demand for oil. use demand and supply curves to characterize the self-sufficient equilibrium for oil in each of these regions. In which region is the price of oil highest? Which region has a comparative advantage in oil? (b) Are there gains to be made from specialization and trade of oil between the Southwest and rest of the country? Assuming no transportation costs, what is the maximum gain from trade possible? Identify the effect that positive transportation costs will have upon gains from trade. What condition must be satisfied for trade and specialization to occur? (c) Between 1950 and 1990, there were significant expansions in pipeline infrastructure. Would you expect the larger pipeline network to raise, lower, or have no effect upon the nation's economic welfare-and why? (d) If there are gains to specialization and trade, this also applies to trade in "all other goods." For these commodities, what condition must be satisfied for trade to occur? Does everyone gain from specialization and trade in oil and "all other goods"? If so, why; and if not, why not?

As of 1982, there were 227,000 miles of pipeline in the USA, over which 537 billion ton-miles of natural gas, crude oil, petroleum products, coal slurry, and chemicals were shipped. Overall, in 1982, pipeline traffic represented 24% of the total ton-miles shipped. The shipment of each of these commodities through the pipeline network illustrates the nonuniform distribution of such products among different regions in the USA (a) Assume that there are two regions of the country: the oil-rich Southwest and the not-so-oil-rich rest of the country. Also, there are two goods: oil and "all other goods." Assuming that each region has a similar demand for oil. use demand and supply curves to characterize the self-sufficient equilibrium for oil in each of these regions. In which region is the price of oil highest? Which region has a comparative advantage in oil? (b) Are there gains to be made from specialization and trade of oil between the Southwest and rest of the country? Assuming no transportation costs, what is the maximum gain from trade possible? Identify the effect that positive transportation costs will have upon gains from trade. What condition must be satisfied for trade and specialization to occur? (c) Between 1950 and 1990, there were significant expansions in pipeline infrastructure. Would you expect the larger pipeline network to raise, lower, or have no effect upon the nation's economic welfare-and why? (d) If there are gains to specialization and trade, this also applies to trade in "all other goods." For these commodities, what condition must be satisfied for trade to occur? Does everyone gain from specialization and trade in oil and "all other goods"? If so, why; and if not, why not?