Assume a Price Floor Is Imposed at the Current Equilibrium

question 46

Multiple Choice

Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases, what will result?

• A) The quantity of lettuce traded remains the same.
• B) A shortage of lettuce will be created.
• C) A surplus of lettuce will be created.
• D) The quantity of lettuce supplied will increase.

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Definitions:

Trading Securities Portfolio

A collection of marketable securities that a business holds for the purpose of reselling them in the short term to profit from market price changes.

Fair Value

An estimate of the price at which an asset or liability could be traded in an orderly transaction between market participants at the measurement date.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Trading Portfolio

A collection of financial assets such as stocks, bonds, commodities, currencies, and derivatives held by an investor, primarily for the purpose of short-term speculation.