Suppose That the Equilibrium Price in the Market for Widgets

question 126

Multiple Choice

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

• A)would necessarily increase even if the higher price resulted in a surplus of widgets.
• B)would necessarily decrease because the higher price would create a surplus of widgets.
• C)might increase or decrease.
• D)would be unaffected.

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Definitions:

Stakeholders

Individuals, groups, or organizations that have an interest or concern in the operations and decisions of a business.

Cost Accounting

The process of recording, analyzing, and tracking all of the costs associated with the production of goods or services.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate overhead costs to products or job orders based on a chosen activity base.

Overapplied Overhead

A situation in cost accounting where the allocated overhead for a period exceeds the actual overhead incurred.