Although the Long-Run Equilibrium Price of Oil Is $80 Per

question 100

Multiple Choice

Although the long-run equilibrium price of oil is $80 per barrel, some producers have much lower costs because their oil reserves are relatively close to the surface and are easier to extract. If the low-cost producers have a minimum LAC equal to $20 per barrel, then the difference ($60 per barrel) is:

• A) an above-normal economic profit.
• B) an economic rent due to the scarcity of low-cost oil reserves.
• C) a profit that will go to zero as new oil producers enter the market.
• D) none of the above

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