Suppose That Large Oil Reserves Are Discovered Off the Coast

question 20

Multiple Choice

Suppose that large oil reserves are discovered off the coast of Cuba, and these reserves will increase the world's supply of oil by 2.5 percent. If the elasticity of demand and supply of oil are 0.50 and 0.40, respectively, what happens to the price of oil?

• A) It falls by 2.5 percent.
• B) It falls by 25 percent.
• C) It falls by 2.78 percent.
• D) It falls by 36 percent.

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Definitions:

Abdomen

The part of the body that contains the digestive organs, bounded by the diaphragm and the pelvis.

SOB

Stands for shortness of breath, a symptom in which a person finds it difficult to breathe or catch their breath, often indicative of respiratory or cardiac conditions.

Forearm

The part of the arm between the wrist and the elbow, consisting of two bones, the radius and ulna, along with muscles, nerves, and blood vessels.

Extends

To stretch out, spread, or continue in space or time; in anatomy, it often refers to the motion increasing the angle between body parts.