Question

Suppose you are an analyst in the oil refinery industry and are responsible for estimating the equilibrium price and quantity of home heating oil. To do so, you must consider factors that can affect the supply of and demand for heating oil.
Determinants of the demand for heating oil include household income, the price of an oil furnace (a complement to heating oil) and the price of natural gas (a substitute for heating oil). Determinants of the supply of heating oil include the cost of crude oil and the cost of refining crude oil into home heating oil.
1. Suppose that all of the determinants of the supply and demand for heating oil are equal to their initital values. The equilibrium quantity in this market is ___ barrels of heating oil per day,
A. 60,000
B. 50,000
C. 70,000
D. 80,000
E. 40,000
2. and the equilibrium price is ____ per barrel.
A. $40
B. $70
C. $60
D. $50
E. $80

Answer 1

Answer:

1. 80,000

2. $40 per barrel

Explanation:

1. As we can see from the table provided The equilibrium quantity in this market is 80,000 barrels of heating oil per day,  as quantity demanded match quantity supplied

2. As we can see from the table provided The equilibrium price is $40 per barrel as in this cost there is an intersection of quantity demanded and quantity supplied. In other words the equilibrium price and quantity could be find out when the quantity demanded equal to quantity supplied