When gasoline prices are high, oil refiners have an incentive to pull every last drop of gasoline out of a barrel of crude. This implies that an increase in the demand for gasoline will cause a(n) ______ quantity supplied of gasoline and ______ the supply of the remaining crude oil products.
A) increased; increase
B) increased; reduce
C) reduced; increase
D) reduced; decrease

Question

Quizplus · Accepted Answer

When there is an increase in the demand for gasoline, refiners try to extract more gasoline from crude oil, which leads to an increased supply of gasoline. However, the process of extracting more gasoline from crude oil reduces the supply of remaining crude oil products, as refiners are not able to produce the same amount of other products from the same barrel of crude oil. Therefore, an increase in the demand for gasoline results in an increased quantity supplied of gasoline and a reduced supply of the remaining crude oil products. Choice B correctly reflects this relationship.

When Gasoline Prices Are High, Oil Refiners Have an Incentive