Answered: Current Stats for Gasoline: Government…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Current Stats for Gasoline:

Government Enforced Price Ceiling - $4.50/gallon

Current Market Equilibrium - $3.00/gallon

OPEC, the largest global supplier of oil used to make gasoline, has decided to reduce output by 50%. This policy change is expected to drive up the cost of gasoline to $5.00/gallon. How does that price change interact with the price ceiling?

A. Changes the Price Ceiling from Binding to Non-Binding

B. Disrupts Oil Supply

C. Changes the Price Ceiling from Non-Binding to Binding

D. No Change

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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