The below figure shows the demand and supply curves in the market for gasoline. The price and quantity at the point of intersection of the demand and supply curves is $30 and 300 gallons respectively.Figure 3.6

-The removal of a price ceiling in a market results in:
A)an increase in the market price.
B)a shortage in the market.
C)over-production of the commodity and a surplus.
D)a fall in the market price.
E)abnormal profits for producers.

Question

The below figure shows the demand and supply curves in the market for gasoline. The price and quantity at the point of intersection of the demand and supply curves is $30 and 300 gallons respectively.Figure 3.6
 
-The removal of a price ceiling in a market results in:
A)an increase in the market price. 
B)a shortage in the market. 
C)over-production of the commodity and a surplus. 
D)a fall in the market price. 
E)abnormal profits for producers.

Quizplus · Accepted Answer

A price ceiling is a government-imposed limit on the price that can be charged for a particular product or service. In this case, if the price ceiling is removed in the gasoline market, it means that the government is no longer imposing a maximum price and sellers are free to charge higher prices. This would result in an increase in the market price as the market moves towards equilibrium where the supply meets the demand. Thus, option A is the best choice. Options B, C, D, and E are incorrect as they do not represent the possible outcomes of removing a price ceiling.

The Below Figure Shows the Demand and Supply Curves in the Market