The Fact That New Methods to Extract Oil Are Developed

question 1

Multiple Choice

The fact that new methods to extract oil are developed as oil prices increase suggests

• A) nothing; changes in technology occur regardless of market prices.
• B) that invention does respond to economic signals and is endogenous.
• C) that methods of production do not change in response to factor- price changes.
• D) that invention is exogenous.
• E) that oil has many close substitutes.

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Definitions:

Differentiated

Products or services that are distinct from others based on quality, features, or branding to create a perceived difference.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, free entry and exit, and perfect information, leading to an efficient allocation of resources.

Zero Economic Profits

A situation where a firm covers all its costs, including the opportunity costs, resulting in no additional profit above the normal rate of return.

Strategic Interdependence

A situation in which the actions of one entity affect the outcomes of another in a business environment.