Refer to the Graph Above

question 46

Multiple Choice

Refer to the graph above. Suppose consumers do not know the safety risks associated with a particular good, and that the free-market equilibrium is at E as shown in the diagram above. If an independent agency now provides accurate information about the harmful characteristics of the product, then:

• A) The supply curve will shift to the left
• B) The supply curve will shift to the right
• C) Both the new equilibrium price and quantity will be lower
• D) The new equilibrium price will be higher but the equilibrium quantity will be either higher or lower

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Definitions:

Expense Account

An account used in accounting to track expenditures related to the operation of a business, including costs for goods, services, and operational activities.

Adjusting Journal Entries

Entries in accounting made during the close of a financial period, aiming to accurately allocate profits and expenditures to their respective periods of occurrence.

Net Income

A company's overall earnings following the deduction of all expenses and taxes from its total revenue.

Adjusting Entry

An adjusting entry is a journal entry made in the accounting records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.