If the Price in a Market Is Above Its Equilibrium

question 97

Multiple Choice

If the price in a market is above its equilibrium level, there will be a:

• A) surplus and downward pressure on price.
• B) surplus and upward pressure on price.
• C) shortage and downward pressure on price.
• D) shortage and upward pressure on price.

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Definitions:

Ending Inventory

The total value of all inventory in stock at the end of an accounting period, calculated using the cost of goods sold formula.

FIFO Retail Inventory Method

An inventory valuation method which assumes that items purchased or produced first are sold first, thereby computing inventory based on the most recent prices.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as beginning inventory plus purchases minus cost of goods sold.

Net Markups

The amount added to the cost price of goods to cover overhead and profit, minus any discounts or allowances.