Situation 4-1 During the winter of 1973-74, a general system of wage and price controls (including a price ceiling on gasoline)was in force in the United States. At the beginning of 1974, some oil-producing countries imposed an oil embargo (a legal prohibition on commerce)on the West. In the spring of 1974, price controls were abolished.
Refer to Situation 4-1. An economist would have most likely predicted that once price controls were abolished in the spring of 1974,
A)the price of gasoline would decline sharply.
B)the surplus of gasoline would go away.
C)the shortage of gasoline would go away.
D)the demand for gasoline would decrease.

Question

Quizplus · Accepted Answer

The shortage of gasoline would go away once price controls were abolished because the price ceiling on gasoline had been causing a shortage of gasoline due to excess demand. Once price controls were lifted, the price of gasoline would increase and the shortage would disappear.

Situation 4-1 During the Winter of 1973-74, a General System