If the Price of Oil Increases from $80 to $90

question 40

Multiple Choice

If the price of oil increases from $80 to $90 per barrel, the quantity supplied increases from 100 to 105 million barrels per day. What is the price elasticity of supply using the midpoint method?

• A) 0.41
• B) 0.22
• C) 0.15
• D) 0.05

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Definitions:

Discount Rate

In the context of discounted cash flow analysis, this is the interest rate used to establish the present-day value of future cash inflows.

Net Operating Cash Inflows

This represents the cash that a business generates from its ordinary, operational activities, excluding financing or investment cash flows.

Working Capital Investment

The funding required to cover the operation's day-to-day financial activities.

Salvage Value

The estimated remaining valuation of an asset at the close of its usability period.