As a Seller of a Product Subject to a Binding

question 76

Multiple Choice

As a seller of a product subject to a binding price floor,you would be better off in which of the following situations?

• A) You would be better off under a binding price floor because you would be able to sell all that you produce at a higher price.
• B) You would be better off under a binding price floor because you would be able to sell goods that are smaller and cost less to produce.
• C) You would be better off under a binding price floor because you would be able to sell goods of lower quality, which cost less to produce.
• D) You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.
• E) There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

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Definitions:

Ending Inventory

The value of goods available for sale at the end of an accounting period, determined by physical counts or accounting methods.

LIFO

Stands for Last In, First Out, an inventory valuation method where the most recently produced or purchased items are recorded as sold first.

Periodic Inventory System

An inventory accounting system where inventory counts are performed and updated at specific intervals to determine cost of goods sold and ending inventory levels.

Ending Inventory

The value of goods available for sale at the end of an accounting period. It is the beginning inventory plus purchases minus the cost of goods sold.