A Major Hurricane Damages Many Oil Refineries, Which Increases the Market

question 261

Multiple Choice

A major hurricane damages many oil refineries, which increases the market price of gasoline from $3.50 to $5 per gallon. The Attorney General threatens legal action against gas station owners who raise prices above pre-hurricane levels, causing gas station owners to reluctantly sell gas for $3.50 per gallon. At $3.50 per gallon, shortages cause buyers to wait in line for 2 hours. If the average purchase is 15 gallons and buyers value their time at $20 an hour, is the Attorney General helping?

• A) No, paying $92.50 at $3.50 per gallon is more expensive than $75 at $5.00 per gallon.
• B) Yes, paying $52.50 at $3.50 is cheaper than $75 at $5.00 per gallon.
• C) Yes, gas is cheaper at $3.50 per gallon because the waiting costs keep gas prices low.
• D) No, $5.00 per gallon would insure that buyers could always buy as much as they want.

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Definitions:

Target Market

A specific group of consumers at which a product or service is aimed, defined by demographic, geographic, and psychographic characteristics.

Percentage-of-Sales Method

A budgeting approach where advertising and marketing expenses are set as a fixed percentage of sales revenue.

Objective-and-Task Method

A budgeting approach in marketing that starts with defining specific objectives, determining the tasks needed to achieve those objectives, and estimating the cost of performing those tasks.

Budgeting Approach

A methodological process of creating a plan to spend an entity's resources, ensuring financial stability and goal achievement.