Refer to the Figure Below

question 120

Multiple Choice

Refer to the figure below. Suppose a consumer protection group convinces the government to impose price controls in this market. If the government requires cheese to be sold for less than the equilibrium price, then, relative to before the price controls, total consumer surplus in the market:

• A)would increase because consumers would be able to purchase the same quantity of cheese at a lower price.
• B)would increase because consumers would be able to purchase more cheese at a lower price.
• C)could either increase or decrease.
• D)would decrease because of the reduction in equilibrium price.

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Definitions:

Statement of Cash Flows

A financial document that summarizes the amount of cash and cash equivalents entering and leaving a company, essentially showing how the company raises and spends money.

Operating Activities

Activities directly related to the day-to-day operations and business functions such as sales, purchase of inventory, and payment of wages that affect the cash flow of a company.

Financing Activities

These activities include transactions and events that affect the long-term liabilities and equity of an entity, such as issuing debt or equity securities.

Investing Activities

Activities reported on the cash flow statement that relate to the acquisition and disposal of long-term assets and other investments not considered cash equivalents.