Suppose That the Equilibrium Price in the Market for Widgets

question 126

Multiple Choice

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

• A)would necessarily increase even if the higher price resulted in a surplus of widgets.
• B)would necessarily decrease because the higher price would create a surplus of widgets.
• C)might increase or decrease.
• D)would be unaffected.

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Definitions:

Funds

Capital that is set aside for a specific purpose or project, often collected from various sources and utilized for investment or expenses.

Repaid

Refers to the action of paying back money that was borrowed.

Short-term Sources

refer to financial resources or loans that are expected to be repaid within a year.

Permanent Assets

Also known as fixed assets; these are long-term resources owned by a business, like property, plant, and equipment, expected to provide value for several years.