Use the information for the question(s)below. As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude. Assuming you currently have 10,000 bbl of WTI crude, the added benefit (cost)to you if you were to sell the 10,000 bbl of WTI crude and use the proceeds to purchase and refine ANS crude is closest to ________.
A)($1400)
B)$1400
C)($3908)
D)$3908

Question

Use the information for the question(s)below.  As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude. Assuming you currently have 10,000 bbl of WTI crude, the added benefit (cost)to you if you were to sell the 10,000 bbl of WTI crude and use the proceeds to purchase and refine ANS crude is closest to ________.
A)($1400) 
B)$1400 
C)($3908) 
D)$3908

Quizplus · Accepted Answer

The added benefit to the refiner if they sell 10,000 bbl of WTI crude and use the proceeds to purchase and refine ANS crude can be calculated as follows:

Revenue from selling WTI crude = 10,000 bbl x $77/bbl = $770,000
Cost of purchasing 10,000 bbl of ANS crude = 10,000 bbl x $72/bbl = $720,000
Revenue from refining 10,000 bbl of ANS crude = 10,000 bbl x $76/bbl = $760,000
Added benefit = ($760,000 - $720,000) - $770,000 = $3908

Therefore, the best choice is D: ($3908).

Use the Information for the Question(s)below