The Price of Oil Is $115 Per Barrel

question 4

Multiple Choice

The price of oil is $115 per barrel.The effective lease rate and risk free rate are 3.0% and 4.0%,respectively.The constant cost of extraction is $85 per barrel and the volatility of prices is 15.0%.If an untapped well costs $2,100 to open and can produce indefinitely,at what price per barrel should the well be opened?

• A) $349
• B) $423
• C) $454
• D) $484

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Definitions:

Perception of Quality

The subjective assessment of a product or service's overall excellence or desirability.

Taste Test

A method of evaluating a food item's flavor, texture, and aroma preferences among consumers.

Flavour

The distinctive taste and aroma of food or drink, stemming from its ingredients and preparation methods.

Representativeness Heuristic

A cognitive shortcut used in decision-making that relies on comparing the similarity of current situations to stereotypes or prototypes.