FIGURE 5-2 -Refer to Figure 5-2.A Price Floor Set at a Price

question 63

Multiple Choice

FIGURE 5-2
-Refer to Figure 5-2.A price floor set at a price of $1.00 will result in

• A)a shortage of 10 units.
• B)a shortage of 20 units.
• C)a surplus of 10 units.
• D)a surplus of 20 units.
• E)no change in the market outcomes.

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Definitions:

Retail Inventory Method

An accounting method used by retailers to estimate inventory value by converting retail prices to cost, often used for financial reporting and determining cost of goods sold.

Selling Prices

The set price at which goods and services are sold to customers, determined by factors such as cost, competition, and demand.

Ending Inventory

The cost of merchandise ready to be sold at the close of an accounting cycle, found by taking the initial inventory, adding purchases, and subtracting the cost of goods sold.

Inventory Valuation

The method used to assign a monetary value to inventory, which affects the cost of goods sold and gross profit.