Assume a Market Price Is Set Artificially High

question 142

Multiple Choice

Assume a market price is set artificially high. In other words, the price is set above the equilibrium price. How will this affect the market?

• A) Every consumer loses surplus, and it all gets transferred to producers.
• B) Every producer gains surplus, due to the higher price now being charged.
• C) Some consumers drop out of the market, and those left lose some surplus.
• D) None of these are correct.

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Definitions:

Stockholders' Equity

Stockholders' Equity is the residual interest in the assets of a corporation after deducting its liabilities, indicating the ownership interest of the shareholders.

Trading Portfolio

A collection of financial assets such as stocks, bonds, commodities, currencies, and derivatives, actively managed and traded to achieve short-term financial gains.

Fair Value Adjustment

A financial process that alters the reported value of an asset or liability to reflect its current market value.

Common Stock C

A classification of common stock that may have specific rights, privileges, or restrictions compared to other classes.