The accompany diagram shows the market for gasoline,in which there are 1,000 consumers.Gasoline can be produced at a constant marginal cost of $2 per gallon.When the market is in equilibrium,the average consumer uses 15 gallons of gasoline per week. Suppose a war breaks out,temporarily limiting the amount of gasoline available for civilian use to 10,000 gallons per week.In the interest of fairness,the government allocates 10 gallons per week to each consumer,taxes each consumer $20 per week,and forbids barter in gasoline.Will the shaded area in the diagram accurately measure the loss in consumers' surplus? Why or why not?

Question

The accompany diagram shows the market for gasoline,in which there are 1,000 consumers.Gasoline can be produced at a constant marginal cost of $2 per gallon.When the market is in equilibrium,the average consumer uses 15 gallons of gasoline per week.  Suppose a war breaks out,temporarily limiting the amount of gasoline available for civilian use to 10,000 gallons per week.In the interest of fairness,the government allocates 10 gallons per week to each consumer,taxes each consumer $20 per week,and forbids barter in gasoline.Will the shaded area in the diagram accurately measure the loss in consumers' surplus? Why or why not?

Quizplus · Accepted Answer

The Answer of The accompany diagram shows the market for gasoline,in which there are 1,000 consumers.Gasoline can be produced at a constant marginal cost of $2 per gallon.When the market is in equilibrium,the average consumer uses 15 gallons of gasoline per week.  Suppose a war breaks out,temporarily limiting the amount of gasoline available for civilian use to 10,000 gallons per week.In the interest of fairness,the government allocates 10 gallons per week to each consumer,taxes each consumer $20 per week,and forbids barter in gasoline.Will the shaded area in the diagram accurately measure the loss in consumers' surplus? Why or why not?

The Accompany Diagram Shows the Market for Gasoline,in Which There