Answer Happy

The current conflict in Ukraine has prompted talk of a possible
embargo on gas produced in Russia. Using diagrams, explain the
likely effect that such an embargo would have on a) the market
price for gas. b) the price charged to consumers by an energy
company who purchases gas in the open market and provides it to UK
consumers, focusing on the case where the energy market in UK is
perfectly competitive. How will consumer and producer surplus be
affected? c) the price charged to consumers by a monopoly energy
company who purchases gas in the open market and provides it to UK
consumers (hence, focusing on the case where the energy market in
UK is composed of a single firm). d) Some commentators have
proposed that the UK government should charge a per-unit tax to
energy companies and redistribute the tax income to the British
public to offset some of the negative effects of the current energy
shock. What do you think would be the effect of this scheme in the
case of a monopolistic energy market? Can you think of an
alternative way the government could intervene in the energy market
to help curb the adverse effects the current energy shock is likely
to have on the average British household?