If the Equilibrium Price of Gasoline Is $4

question 58

Multiple Choice

If the equilibrium price of gasoline is $4.00 per gallon and the government will not allow oil companies to charge more than $3.00 per gallon of gasoline, which of the following will happen?

• A) Demand must eventually decrease so that the market will come into equilibrium at a price of $3.00.
• B) Supply must eventually increase so that the market will come into equilibrium at a price of $3.00.
• C) A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline.
• D) The market will be in equilibrium at a price of $3.00.

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Definitions:

Total Fixed Cost

The overall amount of costs that are unaffected by production volume or output.

Average Total Cost

the total cost of production divided by the number of units produced, representing the cost per unit.

Fixed Cost

Fixed costs are those that stay the same, unaffected by the volume of production or sales, and cover charges like rent, salaries, and insurance fees.

Total Variable Cost

The sum of all costs that vary with the level of output, such as raw materials and labor expenses, for a given period.