Refer to Scenario 3

question 305

Multiple Choice

Refer to Scenario 3.2 below to answer the question(s) that follow.
SCENARIO 3.2: Lettuce and spinach are substitutes. Lettuce and tomatoes are complements. Lettuce is a normal good. During the winter, about 20% of the lettuce crop was destroyed by flooding.
-Refer to Scenario 3.2. As a result of the flooding during the winter, you would expect that

• A) the price of lettuce would increase, the supply of lettuce would increase, and the quantity demanded of lettuce would decrease.
• B) the supply of lettuce would decrease, the price of lettuce would increase, and the quantity demanded of lettuce would decrease.
• C) the price of lettuce would increase and both the quantity of lettuce supplied and the quantity of lettuce demanded would increase.
• D) the supply of lettuce would decrease, the price of lettuce would increase, and the demand for lettuce would decrease.

---

Definitions:

Permanent/Temporary

A classification that distinguishes between actions or objects that are intended to last indefinitely (permanent) and those expected to change or conclude after a certain period (temporary).

Normal Balance

The side of the accounting equation (debit or credit) where increases in the account are recorded.

Financial Statement

A written report which quantitatively describes the financial health of a company, including balance sheet, income statement, and cash flow statement.

Permanent/Temporary

Refers to the classification of accounts where permanent accounts are balance sheet items that carry over into the next fiscal period, and temporary accounts are income statement items that are closed to equity at the end of the fiscal period.