Coal is an input in the production of oil. Suppose that over the last 3 months, the price of oil has increased and the quantity sold of oil has fallen. Other things remaining the same, which of the following is most likely to be true?

Question

Quizplus · Accepted Answer

The increase in the price of oil and the decrease in the quantity sold suggest a decrease in supply. A likely cause for this could be an increase in production costs, such as coal miners receiving large wage increases, which would increase the cost of coal and thus reduce the supply of oil.

Coal Is an Input in the Production of Oil