In an economy where heating oil is the primary source of heat for most households, new supplies of natural gas?
In an economy where heating oil is the primary source of heat for most households, new supplies of natural gas, a substitute for heating oil, are discovered. Natural gas provides heat at a much lower cost. What is the most likely effect of these discoveries on the market price and quantity of heating oil produced? A) the price will decrease and the quantity produced will decrease. B) the price will decrease and the quantity produced will increase. C) the price will increase and the quantity produced will increase. D) the price will increase and the quantity produced will decrease.
A) The price of oil will decrease as it must compete with natural gas for customers. Only the lowest cost producers will be able to make a profit at the lower prices, so the supply will decrease as well.
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