Question

In 1962, the average cost of 1 gallon of gasoline in the United States was $0.31. The cost of gasoline increased by an average of 3% per year. What was the average cost of 1 gallon of gasoline in 1972?

A.
$0.32

B.
$0.40

C.
$0.42

D.
$0.93

Answer 1

Answer: $0.42

Explanation:

The rate at which the average cost of 1 gallon of gasoline is increasing is exponential. We would apply the formula for exponential growth which is expressed as

y = b(1 + r)^ t

Where

y represents the cost after t years.

t represents the number of years.

b represents the initial cost.

r represents rate of growth.

From the information given,

b = $0.31

r = 3% = 3/100 = 0.03

t = 1972 - 1962 = 10 years

Therefore,

y = 0.31(1 + 0.03)^10

y = 0.31(1.03)^10

y = $0.42