Suppose That War in the Middle East Reduces the Supply

question 27

Multiple Choice

Suppose that war in the Middle East reduces the supply of oil forcing the country to economize on oil. How should the central planner optimize the economic problem under this situation?

• A) shift oil out of uses where good substitutes for oil exist
• B) supply oil for uses where few substitutes for oil exist
• C) Both of the answers are correct.
• D) Neither of the answers is correct.

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Definitions:

Inequality

The uneven distribution or imbalance of resources, opportunities, and rights among individuals or groups, leading to disparities in wealth, status, and power.

Formality

The degree to which activities, procedures, or operations are structured and officially sanctioned.

Guanxi

The Chinese practice of building networks for social exchange.

Social Exchange

A conceptual framework that suggests social behavior is the result of an exchange process aimed at maximizing benefits and minimizing costs in relationships.