Question 7: [20 points] In North Carolina (NC), there are gas shortages. A shortage is when...

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Question 7: [20 points] In North Carolina (NC), there are gas shortages. A shortage" is when the market price for an item is such that quantity demanded greatly exceeds quantity supplied. The federal government is considering implementing a ban on "price gouging" during this gas shortage. (a) [10 points] If the ban on price gouging is implemented (i.e. prices must remain around their usual level), how will what little gas is available be allocated? Will there still be a shortage of gas? Who are winners and losers from this policy? (b) [10 points] If the ban is not implemented and gas stations can raise prices to whatever level they choose, how will what little gas is available be rationed? Will there still be a shortage of gas? Who are the winners and losers from this policy? Question 7: [20 points] In North Carolina (NC), there are gas shortages. A shortage" is when the market price for an item is such that quantity demanded greatly exceeds quantity supplied. The federal government is considering implementing a ban on "price gouging" during this gas shortage. (a) [10 points] If the ban on price gouging is implemented (i.e. prices must remain around their usual level), how will what little gas is available be allocated? Will there still be a shortage of gas? Who are winners and losers from this policy? (b) [10 points] If the ban is not implemented and gas stations can raise prices to whatever level they choose, how will what little gas is available be rationed? Will there still be a shortage of gas? Who are the winners and losers from this policy?

Answer rating: 100% (QA)

a Implementation of Price Gouging Ban Allocation of Gas Without the ability to raise prices gas stations would likely resort to nonprice allocation methods such as long queues rationing or imposing li... View the full answer