Suppose That the Equilibrium Price in the Market for Widgets

question 190

Multiple Choice

Suppose that the equilibrium price in the market for widgets is $5.If a law reduced the maximum legal price for widgets to $4,

• 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:

Sales Journal

An accounting ledger in which sales of services or goods on credit are recorded, also known as the sales book.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Unearned Rent

Income received by a landlord for rent that has been paid in advance, which is considered a liability until the period it pertains to occurs.

Income Summary

Income Summary is an account to which all income statement accounts are transferred at the end of an accounting period to calculate the net profit or loss.