If Price Is Increased by Law from a Market Equilibrium

question 25

Multiple Choice

If price is increased by law from a market equilibrium value of $5 to a higher value of $6:

• A) both producer surplus and consumer surplus will increase.
• B) consumer surplus will decrease and there will be some lost surplus.
• C) producer surplus will decrease and there will be some lost surplus.
• D) there will be lost surplus, as both producer surplus and consumer surplus decrease.

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Definitions:

AASB 128/IAS 28

A standard specifying the accounting treatment for investments in associates and joint ventures, focusing on the application of the equity method.

Managerial Personnel

Employees who are responsible for making key decisions and overseeing the operations of a company, including executives and departmental managers.

Asset Revaluation Surplus

The increase in value of an asset, reflected on a company's financial statements, after it has been revalued to its current market value.