Aquilonia Has Decided to End Its Policy of Not Trading

question 87

Multiple Choice

Aquilonia has decided to end its policy of not trading with the rest of the world.When it ends its trade restrictions,it discovers that it is importing incense,exporting steel,and neither importing nor exporting rugs.We can conclude that producer surplus in Aquilonia is now

• A)higher in the steel market, lower in the incense market, and unchanged in the rug market.
• B)higher in the incense and steel markets, and unchanged in the rug market.
• C)lower in the incense and rug markets, and higher in the steel market.
• D)lower in the incense and steel markets, and the same in the rug market.

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Definitions:

Statement of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company, showing how the company's operations are running, where its money is coming from, and how it is being spent.

Indirect Method

A way of presenting the cash flow statement where net income is adjusted for non-cash transactions, depreciation, and changes in working capital to calculate cash flow from operating activities.

Operating Activities

Operating activities involve the day-to-day functions that are directly related to producing and delivering a company's goods and services, contributing to cash inflows and outflows during a period.

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.