When Prices in a Market Are Fixed Either Above or Below

question 144

Multiple Choice

When prices in a market are fixed either above or below the equilibrium price, what is the result?

• A) When price is set above, there is a surplus; and when price is set below, there is a shortage.
• B) When price is set above, there is a shortage; and when price is set below, there is a surplus.
• C) When price is set above, there is a surplus; and when price is set below, there is a surplus.
• D) When price is set above, there is a shortage; and when price is set below, there is a shortage.

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Definitions:

Contra Account

An account used in accounting to record reductions of related accounts, which has a balance opposite to the normal balance of the related account.

Unearned Rental Revenue

Income received from renters but not yet earned because the rental period has not occurred.

Bad Debts Expense

The cost recorded by businesses to cover accounts receivable that are not expected to be collected.

Rental Income

Rental income is income received from leasing out property or equipment, forming a source of earnings for businesses and individuals alike.