If the Equilibrium Price of Corn Is 20 Cents an Ear

question 180

Multiple Choice

If the equilibrium price of corn is 20 cents an ear and the government imposes a floor of 30 cents an ear,the price of corn will ______________________.

• A)increase to 30 cents
• B)remain at 20 cents
• C)rise to about 25 cents
• D)be impossible to determine

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Definitions:

Uncollectible Accounts Expense

An expense account that represents money owed to a company that is not expected to be collected due to customer defaults.

Direct Write-off Method

An accounting method where bad debts or uncollectible accounts receivable are directly written off against income at the time they are deemed uncollectible.

Bad Debt Expense

The cost associated with accounts receivable that a company is unable to collect, considered as an expense on the income statement.

Accounts Receivable Turnover Ratio

A financial metric that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by average accounts receivable.