Price controls on gasoline
A)increase consumer surplus.
B)create a shortage of gasoline.
C)create a surplus of gasoline.
D)increase producer surplus for all producers.

Question

Quizplus · Accepted Answer

Price controls on gasoline, such as setting a maximum price, result in the price being below the equilibrium price. This causes a shortage of gasoline as the quantity demanded exceeds the quantity supplied. Therefore, the best choice is B. The decrease in price due to the price control may increase consumer surplus, but the shortage of gasoline would negate any benefit. There would not be a surplus of gasoline, and producer surplus would only increase for producers who are able to sell their limited supply at the controlled price. Overall, price controls on gasoline are likely to result in negative consequences.

Price Controls on Gasoline