Activity: Considering the initial market equilibrium of figure 2.9 above, show the new equilibrium

1. if there is an increase in supply and proportionate increase in demand

2. if the magnitude of an increment in demand is less than an increment in

supply

3. if demand and supply change in the opposite directions
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d. The CPA may be assessed a tax return preparer penalty.

Explanation:

A CPA is responsible for verification while preparing the tax return of a client, and accordingly the tax return is to be prepared reflecting all the true expenses, and incomes.

In this manner the CPA shall be careful that nothing is defaulted in the tax return. In the given instance the CPA did not verify the expense, whether actual or fraud, and allowed while preparing the tax return.

Accordingly, he shall be held liable for any mischief, and thus, he can be assessed as fr the tax return preparer penalty.