When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?
A) Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase.
B) Gas station owners are attempting to repeal the laws of supply and demand.
C) Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost.
D) A decline in consumer demand generally causes gas station owners to raise their prices.

Question

Quizplus · Accepted Answer

Gas station owners raise prices in anticipation of higher replacement costs due to potential supply disruptions from the conflict, reflecting expected future costs.

When a Conflict Arises in a Major Oil-Exporting Area of the World