Suppose the Equilibrium Price of Milk Is $3 Per Gallon

question 69

Multiple Choice

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

• A) rations the excess demand for milk among consumers.
• B) buys the excess supply of milk and removes it from the market.
• C) Both A and B are plausible actions.
• D) The government cannot maintain the price above the equilibrium level.

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Definitions:

Trial Balance

A list of accounts and their balances at a given time.

Terms 2/10 N/30

Terms 2/10 N/30 is a commercial credit term indicating that a buyer can deduct 2% of the invoice amount if payment is made within 10 days; otherwise, the full invoice amount is due in 30 days.

Invoice Paid

A financial transaction where an invoice has been settled or fulfilled, indicating that the billed goods or services have been paid for by the recipient.

Discount

A discount refers to a reduction from the usual cost of goods or services, often used as a marketing strategy to increase sales or reward customers.