Suppose That the EPA Has Proposed Strict Controls on the Amount

question 51

Multiple Choice

Suppose that the EPA has proposed strict controls on the amount of sulfur that diesel fuel contains.These controls were designed to fully offset the cost of pollution generated by diesel fuel vehicles.The effect of the regulation is estimated to increase the equilibrium price of a gallon of diesel fuel by 10 cents.
Refer to the information given above.Assuming that the supply of diesel fuel has a positive slope and demand has a negative slope,the quantity of diesel fuel sold after imposition of the regulation will:

• A)remain the same.
• B)increase.
• C)decrease.
• D)decrease only if diesel fuel is a normal good.

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded equals the quantity supplied, leading to a stable market condition.

Demand

The amount of a product or service that buyers are ready and capable of buying at different price points.

Public Utilities

Companies that provide essential services such as water, electricity, and telecommunications to the public, often under government regulation.

Electricity

A form of energy resulting from the existence of charged particles such as electrons or protons.