In the 1970s, the federal government imposed price controls on natural gas. Which of the following statements is true?
A) These price controls caused a chronic excess supply of natural gas.
B) Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium.
C) Producers gained from the price controls because producer surplus was larger than it would have been under free market equilibrium.
D) This episode of price controls was unusual, because it resulted in no deadweight loss to society.

Question

Quizplus · Accepted Answer

Price controls below the market equilibrium price tend to increase consumer surplus because consumers can purchase the product at a lower price than they would in a free market. However, this often leads to shortages rather than excess supply, as producers are less incentivized to supply the product at the lower price.

In the 1970s, the Federal Government Imposed Price Controls on Natural