Suppose That the Equilibrium Price of a Bushel of Corn

question 41

Essay

Suppose that the equilibrium price of a bushel of corn is $0.75 per gallon.The government decides to place a minimum price on corn and will not allow sellers to charge less than $0.90 per bushel.Draw this situation using a graph.Make sure that you show the original equilibrium and the effect of the minimum price on the market.What will happen in this market? What will happen to total surplus?

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thereby resetting the temporary accounts for the next period.

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay debt.

Accounting Period

A specific period of time for which financial information is reported, typically a fiscal year or quarter.

Expense Accounts

Accounts in the general ledger representing the various costs incurred by a company in the course of its operations, excluding product cost.