16) Crude oil is an important input in the production of gasoline, so it is not surprising that an increase in the price of crude oil increases the price of gasoline. The graph below shows that the prices of the two are highly correlated. (Note that the scale on the left is for gasoline and the scale on the right is For more information on the relationship between exchange rates and vacation expenses, take EC 202 (Introduction to Macroeconomics)! for crude oil). FRED -US Regular All Formulations GAa Price (lef) - Crude Oil Prices: West Texas Intermediate (WIll - Cushing, Oklahoma (right) 5.5 50 5.0 135 15 120 3.5 90 Dolars pe- Barra Diel are ger GEllen 2.5 AL 1.5 30 1 0 2005 2010 2015 2020 Sonce US Freagy Information Administralica Suppose the price of crude oil increases, and as a result, the marginal cost of producing gasoline increases by $1 per gallon. According to the equilibrium model discussed in class, how would this affect the market price of gasoline? A) The price of gasoline will be unaffected B) It will increase by less than $1 per gallon C) It will increase by more than $1 per gallon D) It will increase by exactly $1 per gallon