Table 6.1

-Table 6.1 indicates the demand and supply schedules for oil in the United States.Suppose also that the world price of oil is $75 per barrel and that the United States can buy all the oil it wants at that price.Which of the following statements about the impact of a law banning all oil imports is true?

Question

Table 6.1
  
-Table 6.1 indicates the demand and supply schedules for oil in the United States.Suppose also that the world price of oil is $75 per barrel and that the United States can buy all the oil it wants at that price.Which of the following statements about the impact of a law banning all oil imports is true?

Quizplus · Accepted Answer

If a law banning all oil imports is put in place, the United States would not be able to buy oil from the world market at $75 per barrel. This would decrease the supply of oil in the United States, causing the domestic price of oil to rise above $75 per barrel. Domestic oil producers would benefit from the law because they would be able to charge a higher price and sell more. However, consumers would pay a higher price for oil and have a decrease in consumer surplus. Total surplus in the oil market is likely to decrease due to the decrease in consumer surplus. Therefore, option B is the correct answer.

Table 6.1 -Table 6.1 Indicates the Demand and Supply Schedules for Oil