Which of the Following Statements Is True

question 37

Multiple Choice

Which of the following statements is true?

• A)The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic.
• B)The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic.
• C)The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly.
• D)Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

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Definitions:

Diminishing Returns

A rule that implies that after reaching a certain threshold, the profit rate from investing more into a specific sector won't keep rising unless there are changes in other contributing factors.

Production Function

An equation that describes the maximum output that can be achieved with a given set of inputs.

Labor

The use of human mental and physical efforts in the process of producing goods and offering services.

Average Total Cost

The average cost per unit of output, calculated by dividing the total production cost by the quantity of goods produced.