When the price ceilings on oil and gas were lifted in January 1981:
I. the price of oil rose immediately.
II. the price of oil continued to rise more than 2 years after the controls were eliminated.
III. higher prices gave an incentive to suppliers to increase supply, thus leading eventually to lower prices.

Question

Quizplus · Accepted Answer

I is true, as the lifting of price ceilings led to an immediate increase in the price of oil. II is also true, as the price of oil continued to rise for more than two years after the controls were eliminated, due to various factors such as increased demand and geopolitical events. However, III is also true, as higher prices did give an incentive to suppliers to increase supply, which could eventually lead to lower prices by increasing market competition. Therefore, both statements I and III are true, while II is also true but not relevant to the question of whether incentives led to increased supply.

When the Price Ceilings on Oil and Gas Were Lifted