The revenue of non middle eastern producers

Reference no: EM13861120

Which of the following statements below support how revenues of the relevant firms would change given the following events: Oil well in Eastern Pennsylvania close because of environmental violations reducing the annual revenue to drillers in eastern Pensylvania but a war in the Middle east shuts down oil wells across the entire Middle East and raises the revenue of Non Middle Eastern Producers.

Statements:

The price elasticity of demand for oil is inelastic so a major decrease in world supply caused by War will cause the price of oil to rise by a greater percentage than the decrease in quantity demanded
The loss of oil wells in eastern Pennsylvania will also cause the world price of oil to rise but by a smaller percentage than the decrease in quantity sold worldwide.
The price elasticity of demand for oil is elastic so a major decrease in world supply due to War will cause the price of oil to rise by a greater percentage than the decrease in quantity sold.
The loss of oil wells in eastern Penn will have almost no effect on world price although the revenue of eastern Penn producers will fall.

Answer choices:

Only statement 1 is true
Only statement 4 is true
Statements 1 and 3 are true
Statements 1 and 4 are true

Reference no: EM13861120

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