Part 1Explain the various ways in which a price ceiling on gasoline that is set below the equilibrium price would make buyers and sellers of gasoline better off or worse off.What would happen to total surplus and deadweight loss in this market? Part 1When a price ceiling on gasoline is set below the market equilibrium price, _______. A. all consumers are better off because gas is cheaper. All producers are better off because more consumers want to buy gas at the cheaper price B. consumers who find gas at the lower price are better off and consumers who cannot find any gasoline due to the shortage created by the price ceiling are worse off. All producers are worse off because they sell less gasoline at a lower price than prior to the price ceiling C. consumers who find gas at the lower price are better off and consumers who cannot find any gasoline due to the shortage created by the price ceiling are worse off. Producers are neither worse off nor better off. D. all consumers are worse off because a gas shortage is created. Some producers are better off because they sell all of their gas but other producers are worse off because they sell the gas at a price below cost

Question

Part 1Explain the various ways in which a price ceiling on gasoline that is set below the equilibrium price would make buyers and sellers of gasoline better off or worse off.What would happen to total surplus and deadweight loss in this​ market? Part 1When a price ceiling on gasoline is set below the market equilibrium​ price, _______. A. all consumers are better off because gas is cheaper. All producers are better off because more consumers want to buy gas at the cheaper price B. consumers who find gas at the lower price are better off and consumers who cannot find any gasoline due to the shortage created by the price ceiling are worse off. All producers are worse off because they sell less gasoline at a lower price than prior to the price ceiling C. consumers who find gas at the lower price are better off and consumers who cannot find any gasoline due to the shortage created by the price ceiling are worse off. Producers are neither worse off nor better off. D. all consumers are worse off because a gas shortage is created. Some producers are better off because they sell all of their gas but other producers are worse off because they sell the gas at a price below cost

BlackTom AI · Accepted Answer

This question asks us to evaluate the effects of a price ceiling on gasoline set below the equilibrium price and to describe who is better or worse off, along with impacts on total surplus and deadweight loss. 
Option A suggests that all consumers are better off and all producers are better off due to higher demand at the lower price. However, while some consumers who can buy gas at the lower price are indeed better off, a binding price ceiling below equilibrium creates a shortage, meaning not all consumers who want gas at the lower price can obtain it. This makes the claim that all consumers are better off inaccurate, and the assertion that all producers are better off ignores the shortage and reduced quantity sold at the lower price.
Option B states that consumers who find gas at the lower price are better off, but consumers who cannot find any gasoline due to the shortage are worse off. It also says that all producers are worse off because they sell less gasoline at a lower price than prior to the price ceiling. This aligns with standard results: a binding price ceiling creates a shortage, benefiting those who are able to purchase at the lower price while harming those who cannot obtain gasoline; producers generally lose because they sell less quantity and at a lower price, reducing producer surplus. The overall effect is ambiguous for total surplus, but the shortage clearly reduces total surplus relative to the equilibrium, creating deadweight loss.
Option C claims that consumers who find gas at the lower price are better off and those who cannot find gas are worse off, and that producers are neither worse off nor better off. While it captures the benefit to some consumers and the harm to others due to the shortage, it wrongly asserts that producers are neutral. In a binding price ceiling, producers typically face decreased revenue and quantity, so they are generally worse off, not unchanged.
Option D posits that all consumers are worse off due to the shortage, and that some producers are better off because they sell all their gas while others are worse off because they sell below cost. This is inconsistent with the typical result that some buyers gain from the lower price, so not all consumers are worse off; moreover, while some producers can benefit from higher prices in a shortage, a price ceiling below equilibrium typically lowers the price they receive overall and reduces quantity sold, making the claim that some producers sell all their gas while others sell below cost incomplete and misleading.
In summary, evaluating the pairs of benefits and costs for buyers and sellers under a binding price ceiling below equilibrium, Option B provides the most coherent depiction: there are gains for those who can purchase at the lower price, losses for those unable to buy due to the shortage, and overall producer surplus tends to fall due to reduced quantity and price. This option also correctly implies a deadweight loss arises from the price ceiling reducing total surplus. 
To illustrate the mechanics more clearly, remember: price ceilings bind when below equilibrium price, creating shortage (quantity supplied < quantity demanded); this reduces the gains from trade for some buyers and depresses producers’ revenues, while the market cannot clear at the ceiling price, which lowers total surplus compared to the efficient equilibrium, thereby generating deadweight loss.

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