Today, the Price of Peanuts Increases

question 197

Multiple Choice

Today, the price of peanuts increases. Peanut butter producers and peanut butter consumers expect that the price of peanut butter will rise in the future. In the current market for peanut butter, the equilibrium price rises and the equilibrium quantity increases. It must be the case that

• A)the supply of peanut buttered decreased by more than the demand for peanut butter increased.
• B)the supply of peanut butter decreased by more than the demand for peanut butter decreased.
• C)the demand for peanut butter increased by more than the supply of peanut butter decreased.
• D)the demand for peanut butter increased by more than the supply of peanut butter increased.
• E)peanut butter producers and peanut butter consumers have incorrect expectations.

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Definitions:

Dividend Income

Money that a company pays to its shareholders out of its profits.

AMT Income

Alternative Minimum Tax (AMT) income is a method of calculating taxable income according to parallel tax rules to ensure that certain taxpayers pay at least a minimum amount of tax.

Corporation

A legal entity recognized by law as separate from its owners, capable of holding assets, incurring liabilities, and conducting business.

FMV

Fair Market Value (FMV) refers to the price at which an asset would sell in the marketplace under conditions where both buyer and seller have reasonable knowledge of the asset and are willing to trade without external pressures.