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25. When the price of gasoline rose to $4.00 per gallon in the summer of 2008,...

25. When the price of gasoline rose to $4.00 per gallon in the summer of 2008, many people were outraged at how gas companies were "price gouging" individuals, and called for price controls on gasoline. If the government had agreed to legally cap the price of gasoline, would this have lowered the cost to consumers? Explain.

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Ans. If the government had agreed to legally cap the price of gasoline, when the price of gasoline rose to $4.00 per gallon in the summer of 2008, many people were outraged at how gas companies were "price gouging" individuals, and called for price controls on gasoline. This would have lowered the cost to consumers as government would have putted price ceiling of the price of gasoline and would have provided subsidies for gasoline companies for their losses which will be occuring to them by selling gasoline below market prices for the consumers.

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