Suppose the Price of Oil in Texas Is Initially $30

question 158

Multiple Choice

Suppose the price of oil in Texas is initially $30 per barrel.New Mexico builds several large oil-burning power plants.This causes the price of oil in New Mexico initially to rise to $35 per barrel.According to the law of one price,what can we expect to happen to the price of oil in Texas and New Mexico,respectively,over the long run? Assume that it is difficult to transport oil from Texas to New Mexico.

• A) The price will settle between $30 and $35 per barrel in both Texas and New Mexico,but the prices will likely remain different.
• B) The price will eventually be $30 in both Texas and New Mexico.
• C) The price will eventually be the same,$30 plus shipping costs,in both Texas and New Mexico.
• D) The price will settle between $30 and $35 a barrel in both Texas and New Mexico,but the prices will be the same.
• E) The price will eventually be $35 in both Texas and New Mexico.

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Definitions:

Autonomic Nervous System

The part of the nervous system that controls involuntary bodily functions, such as heartbeat, breathing, and digestion.

Sprained Ankle

An injury to the ligaments around the ankle, often due to twisting or turning the foot beyond its normal movements.

Sensory Neurons

Nerve cells that are responsible for converting external stimuli from the environment into corresponding internal stimuli, allowing for the perception of sensory information.

Central Nervous System

The part of the nervous system that consists of the brain and spinal cord, functioning as the primary control center for processing and sending out information.