Suppose That the Equilibrium Price in the Market for Tomatoes

question 48

Multiple Choice

Suppose that the equilibrium price in the market for tomatoes is $3 per pound.If a law reduced the maximum legal price for tomatoes to $2 per pound,

• A)any possible increase in consumer surplus would be larger than the loss of producer surplus.
• B)any possible increase in consumer surplus would be smaller than the loss of producer surplus.
• C)the resulting increase in producer surplus would be larger than any possible loss of consumer surplus.
• D)the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus.

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Definitions:

Collection Policy

Guidelines and procedures set by a company to manage and collect accounts receivable, or the money owed by customers.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its operations.

Compensating Balances

A minimum account balance that a company agrees to maintain in a bank account to offset the cost of banking services provided.

Transactions Balance

The amount of money held to conduct transactions in the short term, usually reflecting the liquidity needs of an individual or a company.