If the Price of Gas Is Expected to Rise Sharply

question 95

Multiple Choice

If the price of gas is expected to rise sharply in the future, all else the same, the demand for gas today will:

• A) increase
• B) decrease
• C) remain the same
• D) change in an indeterminate direction

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Definitions:

Law of Diminishing Returns

An economic principle stating that, holding all else constant, as one input variable is increased, there is a point at which the marginal per unit output starts decreasing.

Diseconomies of Scale

The phenomenon where an increase in production leads to higher per-unit costs, often due to inefficiencies associated with scale.

Output Units

The measurable quantities or volumes of goods or services produced by a company or industry.

Minimum Efficient Scale

The smallest scale of production where long-term average cost is minimized, helping businesses realize economies of scale.