Question

Pump prices slide as crude oil falls to six-year low The average price for regular gasoline at U.S. pumps fell almost 4 cents in March to $2.50 a gallon. The price of crude oil dropped to $43.46 per barrel on March 17, the lowest since March 2009 Source: Bloomberg Business, March 23, 2015 Explain the effect of a lower crude oil price on the supply of gasoline. A fall in the price of crude oil will O A. lower the cost of producing gasoline and decrease the supply of gasoline O B. lower the cost of producing gasoline and increase the supply of gasoline O C. not change the supply of gasoline, but it might increase the demand for gasoline O D. increase the demand for gasoline and increase the suppply of gasoline

Answer 1

B is right. Gasoline uses crude oil as input. Now fall in crude oil price will reduce cost of production and supply will shift rightwards