A Drought Destroys Much of the Grape Crop

question 120

Multiple Choice

A drought destroys much of the grape crop. As a result, consumer surplus in the market for wine:

• A) decreases.
• B) increases.
• C) remains unchanged.
• D) depends on the deadweight loss.

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Definitions:

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Closing Entry

An accounting action that transfers the balances from temporary accounts to permanent ones at the end of an accounting period.

Owner's Equity

The residual interest in the assets of an enterprise after deducting its liabilities; represents the owner's claims against the company's assets.

Income Summary

An account to which the revenues and expenses are transferred in order to calculate the net income for the period, ultimately transferring to retained earnings.