Suppose increased oil imports raise the total supply of gasoline in the United States.
(A)Draw a supply and demand diagram to show what will happen to the equilibrium price and quantity of gasoline in the United States.Assume that the demand curve does not shift.
(B)Suppose the U.S.government observes that the price of gasoline is decreasing rapidly and imposes a price floor equal to the original equilibrium price before the increase in gasoline supply.What effect does the price floor have on the quantity supplied and demanded of gasoline?
(C)How are consumer surplus and producer surplus affected by the price floor? Graphically show the deadweight loss created by the price floor.

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The Answer of Suppose increased oil imports raise the total supply of gasoline in the United States.
(A)Draw a supply and demand diagram to show what will happen to the equilibrium price and quantity of gasoline in the United States.Assume that the demand curve does not shift.
(B)Suppose the U.S.government observes that the price of gasoline is decreasing rapidly and imposes a price floor equal to the original equilibrium price before the increase in gasoline supply.What effect does the price floor have on the quantity supplied and demanded of gasoline?
(C)How are consumer surplus and producer surplus affected by the price floor? Graphically show the deadweight loss created by the price floor.

Suppose Increased Oil Imports Raise the Total Supply of Gasoline