Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50.The Saudi government's actions will:

A) improve efficiency since the low prices will force producers to find cheaper production methods.
B) result in gasoline surpluses even in an oil-rich country.
C) cause gasoline shortages even in an oil-rich country.
D) necessarily improve equality between rich and poor since the poor can now afford gasoline.

When the government sets prices artificially low, it creates a situation where demand for the product exceeds supply, leading to shortages. In this case, gasoline prices are set at only 17% of the market price, which will likely result in a massive increase in demand for gasoline. In turn, this will exacerbate the shortages that this country already experiences due to the high demand for gasoline. If anything, the Saudi government should be setting higher prices for gasoline to discourage wasteful consumption and to encourage more efficient use of resources.