Assume the world market for oil is competitive and that the marginal cost of producing (extracting and bringing to market) another barrel of oil is $81.40 and the marginal benefit is $79.20. If one more barrel of oil is produced and consumed, how will economic surplus change?

Question

Business

Deangelo Mckinney

11 November, 05:18

Assume the world market for oil is competitive and that the marginal cost of producing (extracting and bringing to market) another barrel of oil is $81.40 and the marginal benefit is $79.20. If one more barrel of oil is produced and consumed, how will economic surplus change?

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Answers (1)

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Seth Trujillo · Answer 1

The economic surplus will decrease by $2.20

Explanation:

$81.40 and $79.20 are marginal cost and benefit, which are the changes to total costs and total benefits due to producing and consuming one additional barrel of oil.

They can be used to calculate change to economic surplus, which is the change to the net economic value received by society, which is given by:

marginal benefit - marginal cost = $79.20 - $81.40 = - $2.20