Scenario: Suppose That the Government Imposes a Price Control on Gasoline

question 91

Multiple Choice

Scenario: Suppose that the government imposes a price control on gasoline where the legal price is set at $1.50 per gallon while the equilibrium price would be $2.25. A shortage ensues. Worried that you may not have enough gas to commute to school and do errands, you get up before dawn to go to a gas station to fill up the tank. But you find yourself waiting in a long line. Fortunately, the station did not run out of gas before your turn came up, and you were happy to drive away with a full tank.
-Refer to the scenario above.Your total cost of getting gas ________.

• A) is lower than the equilibrium price thanks to the price ceiling
• B) is exactly the same as the equilibrium price because you managed to get gas
• C) may be higher than the equilibrium price because of your opportunity cost of waiting in line and uncertainty about availability of gasoline
• D) may be higher than the equilibrium price because the seller usually charges an illegally higher price

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Definitions:

Inventory Period

The average time it takes for a company to sell its inventory and convert it into sales.

Payables Period

The average amount of time it takes for a business to pay its invoices and bills to suppliers.

Payables Period

The average period of time it takes for a business to pay off its debts to suppliers.

Credit Sales

Sales transactions where the payment is deferred, allowing the buyer to pay at a later date.