Assume the Market Is in Equilibrium in the Graph Shown

question 52

Multiple Choice

Assume the market is in equilibrium in the graph shown at demand D and supply S1 (and a quantity of 5) .If the supply curve shifts to S2,and a new equilibrium is reached (at a quantity of 7) ,which of the following is true?

• A) Consumer surplus increases by $5.
• B) Consumer surplus decreases by $5.
• C) Consumer surplus increases by $9.
• D) Consumer surplus decreases by $9.

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Definitions:

Market Basis

Market Basis refers to the approach of valuing assets or securities at their current market prices instead of their cost prices or intrinsic values.

Inventory Valuation

The process of determining the monetary amount associated with the inventory at hand, often using methods such as FIFO, LIFO, or weighted average cost.

Market Decline

A decrease in stock prices or the value of a particular market segment, often signaling a period of investor pessimism or economic downturn.

FOB Shipping Point

A shipping term indicating that the buyer takes ownership of goods being shipped the moment they leave the seller's premises and is responsible for shipping costs and risk of loss.