Final answer:
Setting gasoline prices below the market price would likely lead to a shortage due to increased demand and decreased supply, as it disincentivizes production. The correct answer is option C.
Step-by-step explanation:
If the government of the oil-rich country of Oiland sets gasoline prices at $0.25 per gallon when the market price is $1.50, it would most likely cause gasoline shortages even in an oil-rich country. This is because the artificially low price would increase demand while simultaneously reducing the incentive for producers to supply gasoline. The scenario implies that at a lower price, the quantity of gasoline demanded by consumers increases, as people are encouraged by the cheap fuel to use their cars more and perhaps choose less fuel-efficient vehicles. At the same time, oil producers would have less incentive to produce gasoline, because the profit margins would be much slimmer, leading to a reduction in the quantity supplied.
Suggesting that set low prices would improve efficiency by forcing producers to find cheaper production methods is flawed logic because there is a point below which it is not economically feasible to produce. As for improving equality between rich and poor, while it's true that lower prices would make gasoline more affordable in the short term, the resulting shortages would harm everyone, including the poor, who might end up unable to access gasoline when it is needed.