This year a new oil field with substantial reserves has been discovered. Such discoveries are not made every year. Therefore an increase in the demand for oil will:
A) increase the long-run price of oil more than the short-run price of oil.
B) increase the long-run price of oil less than the short-run price of oil.
C) ensure the long-run price of oil and short-run price of oil increase by the same amount.
D) ensure that the short-run price of oil falls.
E) ensure that the short-run price of oil remains unchanged.

Question

Quizplus · Accepted Answer

The discovery of a new oil field increases supply, which can mitigate the impact of increased demand on long-run prices, causing a smaller increase compared to the short-run where supply is less flexible.

This Year a New Oil Field with Substantial Reserves Has