T-Mobile Pract 3. The short- run price elasticity of demand for gasoline at the
ID: 1103871 • Letter: T
Question
T-Mobile Pract 3. The short- run price elasticity of demand for gasoline at the pump is currently 0.25. Suppose that due to international hostilities, the crude oil supplies is cut off, which results in a drop of 15 percent of US supplies of refined gasoline. Find: a. The new price after the cut off, when the current price is S 3.00 a gallon. b. What would happen if the US government imposes a price ceiling on gas at S 3.00 per gallon c. Under the price ceiling scenario, would the quantity demanded or quantity supplied determine how much gas is purchased d. Would it be the same without the price ceiling scenario (hint: would you answer in c be the same when there is no price ceiling policy)Explanation / Answer
11.c, because staying in market they will incur loss equal to variable cost.
12b, because sam can sell any amount at the given prices.
13. c, because short run revenue is greater than cost
14 d, because profit maximization says firm should produce till point where marginal product is equal to cost.
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