If scientists discover a new form of energy that cuts the cost of producing electricity to the equivalent of $10 a barrel, what will happen to the market for oil?
A) The price of oil would rise because of the competition from the new energy source.
B) The supply of oil would decrease because few suppliers can profitably produce oil at $10 a barrel.
C) There would be no effect on the market for oil.
D) Demand for oil would decrease over time since no one would pay more than $10 for a barrel of oil to produce energy.

Question

Quizplus · Accepted Answer

If a new form of energy is discovered that drastically reduces the cost of producing electricity, demand for oil would likely decrease over time as consumers shift towards the more cost-effective alternative. However, this would not necessarily result in a decrease in the price of oil or a decrease in the supply of oil, as oil is used for many other purposes besides energy production (such as transportation, plastics, and other products). Additionally, some suppliers may still be able to profitably produce oil at higher prices, depending on their cost structures and the nature of the demand for oil.

If Scientists Discover a New Form of Energy That Cuts