Question 1 [6 points]

Assume that the current equilibrium price for a barrel of oil is $23 and the interest rate is 6.90 percent. Round answers to the nearest whole number.

a)What does the price of oil need to be in 4 years to justify extracting it now?

The oil should be extracted if, in 4 years, its price

(select one: is more than, is less than or is equal to?)

$0

b)What will happen if oil producers think that the price of a barrel of oil in 4 years will be more than this figure?

In this case, the producer will

(select one: extract the oil, not extract the oil or be unsure?)