In the spring of 2016 there was a severe forest fire in Alberta, which forced the evacuation of Fort McMurray and the shut down of many oil sands operations.As a result, there was less crude oil produced in Alberta than normal.At the pre-fire equilibrium price (i.e., at the initial equilibrium price), we would expect to see
A)a surplus of gasoline.
B)the quantity demanded equal to the quantity supplied.
C)a shortage of gasoline.
D)an increase in the demand for gasoline.

Question

Quizplus · Accepted Answer

With the decrease in crude oil production, there would be a decrease in the supply of gasoline. This would cause the quantity demanded to exceed the quantity supplied, leading to a shortage of gasoline. Therefore, the pre-fire equilibrium price would no longer result in the quantity demanded equaling the quantity supplied.

In the Spring of 2016 There Was a Severe Forest