Use the information for the question(s)below. As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude.
-Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS)crude oil for 10,000 Bbls of West Texas Intermediate (WTI)crude oil.Assuming you currently have 10,000 Bbls of WTI crude,the added benefit (cost)to you if you take the trade is closest to:
A)($1400).
B)$1400.
C)($3908).
D)$3908.

Question

Use the information for the question(s)below.  As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude.
-Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS)crude oil for 10,000 Bbls of West Texas Intermediate (WTI)crude oil.Assuming you currently have 10,000 Bbls of WTI crude,the added benefit (cost)to you if you take the trade is closest to:
A)($1400). 
B)$1400. 
C)($3908). 
D)$3908.

Quizplus · Accepted Answer

- Currently, you have 10,000 Bbls of WTI crude oil that can produce $77 worth of unleaded gasoline per barrel, so the total value of this amount is $77 x 10,000 = $770,000.
- The other refiner is offering 10,150 Bbls of ANS crude oil that can produce $76 worth of unleaded gasoline per barrel, so the total value of this amount is $76 x 10,150 = $773,800.
- If you take the trade, you would gain an extra 150 Bbls of crude oil that can produce $76 worth of unleaded gasoline per barrel. So, the added benefit would be $76 x 150 = $11,400.
- However, you would also lose 150 Bbls of your WTI crude oil that can produce $77 worth of unleaded gasoline per barrel. So, the added cost would be $77 x 150 = $11,550.
- Therefore, the net cost of taking the trade would be $11,550 - $11,400 = $150, which is negligible compared to the total value of the crude oil. Hence, the best choice is B) $1400.

Use the Information for the Question(s)below