Question
An oil trader wants to buy 5,000 barrels of Brent Crude Oil but has the opportunity to buy just 1,000 barrels of Brent Crude Oil
An oil trader wants to buy 5,000 barrels of Brent Crude Oil but has the opportunity to buy just 1,000 barrels of Brent Crude Oil at a price of $65 per barrel if he also buys 2,000 barrels of West Texas Intermediate (WTI) Oil at a price of $75 per barrel.
The market prices of the products are $80 (Brent) and $70 (WTI) per barrel. Should the trader accept the proposition and why?
a-Because the value of the opportunity is negative, the opportunity should not be taken.
b-Because the trader has no need to buy WTI Oil, the opportunity should not be taken.
c-Because the opportunity includes fewer barrels of Brent than the trader wants, the opportunity should not be taken.
d-Because the value of the opportunity is positive, the opportunity should be taken.
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Intermediate Microeconomics
Authors: Hal R. Varian
9th edition
978-0393123975, 393123979, 393123960, 978-0393919677, 393919676, 978-0393123968
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