An Increase in the Price of Crude Oil,a Basic Input

question 53

Multiple Choice

An increase in the price of crude oil,a basic input into the production of gasoline,is likely to

• A)put downward pressure on the price of gasoline.
• B)put upward pressure on the price of gasoline.
• C)decrease the demand for gasoline.
• D)increase the quantity of gasoline demandeD.

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Definitions:

Marginal Cost

The increase in total cost that arises from an extra unit of production, pivotal for decision-making in production processes.

Diminishing Returns

A principle stating that as more of a variable input is combined with a fixed input, the incremental gains in output will eventually decrease.

Increasing Returns

This refers to a scenario in economics where, as the quantity of input increases, the rate of output increases at a faster rate, leading to economies of scale.

Long-Run Total Cost

The aggregate cost of production when all factors of production are variable and the scale of operation can change.