At the price ceiling of $60, how much gasoline will be supplied?

Question

BlackTom AI · Accepted Answer

This question asks us to determine the quantity of gasoline firms will supply when the price ceiling is set at $60.
First, note there are no multiple-choice options provided to compare against, so we cannot evaluate each alternative choice. In such a case, the key is to understand what the price ceiling implies for supply.
A price ceiling prevents the price from rising above $60. If the current market supply schedule (the relationship between price and quantity supplied) shows the quantity firms are willing to supply at a price of $60, that is the amount that will be supplied, assuming the ceiling is binding (i.e., below the equilibrium price) or at least the price is sufficient to elicit existing supply at that level.
Common misconceptions to avoid:
- Thinking the price ceiling always reduces quantity supplied below the ceiling price without referencing the supply schedule. Quantity supplied depends on the price-quantity point on the supply curve, not on the ceiling alone.
- Concluding that the ceiling increases supply. In fact, ceilings typically do not increase supply; they constrain price and can reduce or leave unchanged the quantity suppliers are willing to supply, depending on where $60 sits on the supply curve.
- Assuming the answer equals the equilibrium quantity or the quantity demanded at the ceiling without checking the supply relationship. The correct supply quantity is determined by the supply curve at the price of $60, not by demand considerations alone.
If the provided answer is 41, that would imply the supply schedule indicates that at a price of $60, firms are willing to supply 41 units of gasoline. This interpretation aligns with the standard approach: identify the quantity supplied at the constrained price from the supply curve or table, and report that as the supplied quantity under the price ceiling.
In sum, the correct reasoning hinges on the specific supply data: at $60, read off the quantity supplied from the supply relationship. If that value is 41 units, then 41 is the supplied quantity under the price ceiling; otherwise, use the corresponding value from the supply schedule to determine the answer.

QAMO 2010-004 Fall 2025 Unit 9: Welfare Economics -- Application Problem

At the price ceiling of $60, how much gasoline will be supplied?

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