If the equilibrium price of gasoline is $2.75 per gallon and the government will not allow oil companies to charge more than $2.00 per gallon of gasoline,which of the following will happen?

Question

Quizplus · Accepted Answer

When the government sets a price ceiling below the equilibrium price, in this case at $2.00 when the equilibrium price is $2.75, it leads to a shortage because the quantity demanded exceeds the quantity supplied at that price. This results in a lower total surplus in the market compared to the surplus at the equilibrium price of $2.75, as some consumers who are willing to pay more than $2.00 cannot find gasoline to buy, and some producers who would sell at prices above $2.00 are not willing to sell at the lower price.

If the Equilibrium Price of Gasoline Is $2