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.
Answer: B
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The law of increasing additional cost is due to
A) scarcity. B) inefficient use of technology. C) the fact that resources are not perfectly adaptable for alternative uses. D) the fact that there are always alternatives and it is costly to figure out which alternative is best.
Under a fixed exchange-rate system, in order to maintain the exchange rate:
a. governments must adopt a laissez-faire economic policy. b. all trading partners must enjoy the same level of economic growth. c. currencies must be inconvertible. d. the imports of one country must equal the exports of its trading partner. e. governments must intervene in the foreign exchange market.