A Firm Has Contracted to Supply 500 000 Gallons of Propane

question 43

Multiple Choice

A firm has contracted to supply 500 000 gallons of propane fuel for $1.49 million to the local council. The council wants to break the contract. What does the minimum current market price of propane need to be in order for the firm to benefit from breaking the contract?

• A)greater than $2.98 per gallon
• B)greater than $2.99 per gallon
• C)greater than $3.00 per gallon
• D)greater than $2.97 per gallon

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Definitions:

Mercantilism

The incorrect theory that a nation’s economic objective should be to accumulate precious metals in the public treasury; this theory prompted trade barriers to cut imports, but other countries retaliated, reducing trade and the gains from specialization.

Trade Gains

The benefits that countries obtain from engaging in international trade, often reflected in improvements in economic welfare, efficiency, and resource allocation.

Supply-side Shocks

Unexpected events that affect the supply side of the economy, potentially altering the cost of production and leading to changes in prices and output.

Consumer Spending

The total expenditure by households and individuals on goods and services within a country's economy.