Situation 4-1 During the Winter of 1973-74, a General System

question 20

Multiple Choice

Situation 4-1 During the winter of 1973-74, a general system of wage and price controls (including a price ceiling on gasoline) was in force in the United States. At the beginning of 1974, some oil-producing countries imposed an oil embargo (a legal prohibition on commerce) on the West. In the spring of 1974, price controls were abolished.
Refer to Situation 4-1. Before the oil embargo, the price ceiling on gasoline had no noticeable effect on the market. What is the most likely explanation for this?

• A)The equilibrium price of gasoline was probably below the price ceiling.
• B)The demand curve for gasoline in the 1970s was vertical.
• C)The supply curve for gasoline in the 1970s was vertical.
• D)The equilibrium price of gasoline was probably above the price ceiling.

---

Definitions:

Operating Activities

Financial transactions and events that affect the operational aspect of a company, including cash flows from operations.

Inventory

The goods and materials a business holds for the ultimate goal of resale, production, or utilisation in the service of manufacturing or providing services.

Accounts Payable

Liabilities representing amounts a company owes to creditors for goods and services purchased on credit and not yet paid.

Average Days

A measure that typically refers to the average number of days an asset is held or the average number of days it takes for a company to convert certain assets into cash.