Company X receives most of its revenues from the sale of gasoline through a network of gas stations that it owns across the country. The company purchases ready-for-sale gasoline from several oil refineries at wholesale prices and sells it to the final consumer at its gas stations. Over the next quarter, the management of Company X expects that the market price of gasoline will rise by approximately 10 percent. Therefore, the management projects that the next quarter’s revenues from the sale of gasoline will also increase by approximately 10 percent.
The management's projection is based on which of the following assumptions?
1]Consumption of gasoline at the company’s gas stations will not drop in response to higher prices.
2]Company profits will not decline below their current level.
3]Higher gasoline prices will not reduce the company’s revenues from other business lines.
4]The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relatively constant.
5]The supply of gasoline is likely to decline over the next quarter.
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