Changes in Accounting Principles Include Changes

question 6

Multiple Choice

Changes in accounting principles include changes:

• A)from FIFO to average cost for inventory.
• B)required because the FASB issues new accounting pronouncements.
• C)to the estimated useful life of a building.
• D)A and B.

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Definitions:

Consumer Surplus

The gulf between the aggregate amount consumers are willing to allocate for a good or service and what they actually end up paying.

Producer Surplus

The variance between the minimum amount producers are prepared to take for a product and the actual payment they get.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing between multiple options.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved, often due to market distortions like taxes or subsidies.