Suppose that war in the Middle East reduces the supply of oil forcing the country to economize on oil. How should the central planner optimize the economic problem under this situation?
A) shift oil out of uses where good substitutes for oil exist
B) supply oil for uses where few substitutes for oil exist
C) Both of the answers are correct.
D) Neither of the answers is correct.

Question

Quizplus · Accepted Answer

By shifting oil out of uses where good substitutes for oil exist, the country can reduce its overall reliance on oil and use alternative resources where possible. At the same time, supplying oil for uses where few substitutes for oil exist ensures that essential activities like transportation and energy generation can continue without undue disruption. By implementing both strategies, the central planner can optimize the country's economic problem and minimize the negative impact of reduced oil supply.

Suppose That War in the Middle East Reduces the Supply