Asked by Michael Kumlien on Jul 18, 2024
Verified
If the government set a price ceiling of 50 cents for a gallon of gasoline,the most likely consequence would be
A) a surplus of gasoline.
B) the demand for automobiles fall.
C) shipping costs rise.
D) a shortage of gasoline.
Price Ceiling
A government-imposed limit on how high a price can be charged for a product, service, or commodity.
Gallon
A unit of measurement for volume, primarily used in the United States, equal to 128 fluid ounces, or approximately 3.785 liters.
- Identify the consequences of government interventions such as price ceilings and price floors.
Verified Answer
LT
Larry ThompsonJul 22, 2024
Final Answer :
D
Explanation :
A price ceiling is a legal maximum price, set by the government, that is lower than the equilibrium price. In this case, if the government sets a price ceiling of 50 cents for a gallon of gasoline, it is below the market equilibrium price. This means that there will be excess demand for gasoline, leading to a shortage of gasoline in the market. Gasoline stations will not be willing and able to supply enough gasoline at 50 cents a gallon, and consumers will try to buy more gasoline than is available at that price. Therefore, there will be long lines, rationing, and other inefficient means of allocating the scarce gasoline.
Learning Objectives
- Identify the consequences of government interventions such as price ceilings and price floors.