Let D₀ and S₀ Be the Initial Demand and Supply

question 42

Multiple Choice

Let D₀ and S₀ be the initial demand and supply curves for gasoline. Let P₀^* and Q₀^* be the initial equilibrium in this market. There is an increase in alternative fuels available through research and development. Which ONE of the following correctly captures the effect of this change on the market for gasoline?

• A) Both equilibrium quantity and price will increase
• B) Both equilibrium quantity and price will decrease
• C) Equilibrium quantity will increase, but equilibrium price will decrease
• D) Equilibrium quantity will decrease, but equilibrium price will increase

---

Definitions:

Dividends Payable

Dividends payable are a liability on a company's balance sheet representing the amount of dividends that the company has declared but has not yet paid out to its shareholders.

Dividends Expense

The sum distributed from a portion of a company's earnings to its shareholders; often associated with preference shares.

Common Stock Dividend Distributable

Stockholders’ equity account that accumulates a stock dividend that has been declared but not yet issued and distributed.

Paid-in Capital

The amount of money that a company has received from shareholders in exchange for shares of stock.