Suppose That OPEC Currently Sets the Oil Price at $1

question 23

Multiple Choice

Suppose that OPEC currently sets the oil price at $1.50 per gallon, and the current consumption is 100 million gallons per day. The price elasticity of demand for oil is estimated to be 0.7 by the initial value method. If OPEC raises the oil price to $1.80 per gallon

• A) quantity demanded decreases by 10 million gallons while total sales revenue increases by $4.4 million per day.
• B) quantity demanded decreases by 14 million gallons while total sales revenue increases by $4.8 million per day.
• C) quantity demanded decreases by 10 million gallons and total sales revenue decreases by $4.4 million per day.
• D) quantity demanded decreases by 14 million gallons and total sales revenue decreases by $4.8 million per day.

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Definitions:

Desire

An intense longing or wish for something to happen.

Unconsciously

Performing actions or behavior without conscious awareness or intention, often based on learned patterns or instincts.

Unacceptable Goal

A target or objective deemed inappropriate or unattainable within a given context or set of circumstances.

Acceptable

Considered satisfactory or permissible in quality, standard, or condition.