Consider a Perfectly Competitive Market with Inverse Market Supply $P = 5 + 3 Q ^ { s }$

question 18

Multiple Choice

Consider a perfectly competitive market with inverse market supply $P = 5 + 3 Q ^ { s }$ and inverse market demand $P = 50 - 2 Q ^ { d }$ . Suppose the government subsidizes this market with a subsidy of $\$ 5$ per unit. What are the equilibrium price and quantity traded before the subsidy?

• A) \(P = 30 ; Q = 10\)
• B) \(P = 25 ; Q = 12.5\)
• C) \(P = 32 ; Q = 9\)
• D) \(P = 35 ; Q = 7.5\)

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Definitions:

Allowance Method

An accounting technique used to estimate and adjust accounts receivable for amounts that are unlikely to be collected.

Carrying Value

The value of an asset as shown on the balance sheet, representing its original cost minus any accumulated depreciation, impairment, or amortization.

Allowance Method

A technique used in accounting to estimate and account for bad debts by recognizing them as an expense before the debts actually become uncollectible.

Bad Debts Expense

Bad debts expense represents the recognition of accounts receivable that are not expected to be collected, impacting a company's financial statements.