Use the Information for the Question(s)below

question 42

Multiple Choice

Use the information for the question(s) below. As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude. Another oil refiner is offering to trade you 10,150 bbl of Alaska North Slope (ANS) crude oil for 10,000 bbl of West Texas Intermediate (WTI) crude oil. Assuming you currently have 10,000 bbl of WTI crude, what should you do?

• A)Sell 10,000 bbl WTI crude on the market and use the proceeds to purchase and refine ANS crude.
• B)Do nothing; refine the 10,000 bbl of WTI crude.
• C)Trade the 10,000 bbl WTI crude with the other refiner and refine the 10,150 bbl of ANS crude.
• D)Trade the 10,000 bbl WTI crude with the other refiner and then sell the 10,150 bbl of ANS crude.

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Definitions:

Deflation

A decrease in the general price level of goods and services, often leading to increased purchasing power of money.

Real GDP

The measurement of a country's economic output adjusted for price changes (inflation or deflation), reflecting the real quantity of goods and services produced.

GDP

Gross Domestic Product, a measure of a country's economic output and performance, representing the total value of all goods and services produced over a specific time period.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy, used to adjust GDP from nominal to real terms.