Assume a Price Floor Is Imposed in the Wheat Market

question 26

Multiple Choice

Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:

• A)​surpluses in both the wheat and gasoline markets.
• B)​shortages in both the wheat and gasoline markets.
• C)​a surplus in the wheat market and an increase the quantity of gasoline traded.
• D)​a surplus in the wheat market and a shortage in the gasoline market.

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Definitions:

Direct Write-Off Method

An accounting practice where specific bad debts are written off against income at the time they are deemed to be uncollectable.

Generally Accepted Accounting Principles

Generally Accepted Accounting Principles (GAAP) are a set of rules, standards, and procedures established for accounting and financial reporting, aimed at ensuring consistency and transparency.

Factoring

A financial transaction in which a business sells its accounts receivable (invoices) to a third party (factor) at a discount, to obtain immediate cash.

Direct Write-Off Method

An accounting method where bad debts are written off as an expense only when they are deemed to be uncollectable.