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Market Equilibrium
1.People benefit by participating in the market because:
a. Resources are no longer limited.
b. There are always participants in the market that are more efficient than you are in
production.
c. Market participation allows individuals to specialize and, ultimately, consume more.
d. Participants in the market do not have to make choices.
e. None of the above reasons
2.Which of the following determinants might change in the consumer-goods market as a result of
an increase in unemployment?
3.Ceteris paribus, which of the following would generally cause an increase in the demand
for automobiles?
a. A decrease in the price of automobiles.
b. An increase in consumers' income.
c. The new models are perceived as ugly compared with old models.
d. Consumer expectations that the price of automobiles will be lower next year.
e. All of the above
4.Which determinant of demand changes in the personal computer market as more
individuals become interested in "surfing the Internet"?
5.Assume a series of forest fires reduces the supply of lumber which is an input in the
production of wooden bats. Baseballs and wooden bats are complements. If the price of
wooden bats increases, we can expect the:
6.Which of the following would not cause the market supply of cell phones to change?
a. Telecommunications are deregulated, and anyone who wants to can produce and sell
cell phones.
b. A cheaper technology for producing plastics used in producing cell phones is
developed.
9.Suppose there are buyers and sellers in a market but no exchange takes place. Assume there
is no government intervention in this market. This implies that:
a. The price must be so high that no one can afford this good.
b. There must be a shortage of the good.
c. The market supply and demand curves do not intersect.
d. Market demand must be upward sloping.
e. There must be surplus of the good.
10. A ballet performance had many empty seats. This implies that the:
a. Hall where the performance was being held was very large.
b. Price of the tickets must have been very low because of the low demand.
c. Ballet group was not very well known.
d. Price of the tickets must have been above the equilibrium price
e. Ballet group performance is very low
11. A market shortage is:
a. The amount by which the quantity demanded exceeds the quantity supplied at a given
price.
b. The result of a price ceiling.
c. A situation in which people cannot buy all the goods and services that they are
willing and otherwise able to buy.
d. All of the above.
e. None of the above situations are correct
12. A rightward shift in a demand curve and a rightward shift in a supply curve both result in
13. A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes
equilibrium:
a. Price to increase and quantity to decrease.
b. Price to decrease and quantity to decrease.
c. Price to increase and quantity to increase.
S u p p ly
$ 2 5
$ 2 0
D o lla rs P e r U n it
$ 1 5
$ 1 0
$ 5
D e m a n d
$ 0
18. 1 0 2 0 3 0 4 0 5 0
Q u a n tity
a. Harpo
b. Chico
c. Zeppo
d. none of them
e. all of them
27. The demand for commodity is perfectly elastic. A firm producing this commodity
currently sells 100 units Rs.150 each. What will be the revenue obtained by the firm if it
increases its price to Rs.160/=
a. Zero b. Rs.16000
28. 200 units of giffen good are sold at a price of Rs.30/-. The price elasticity of demand for
the good is 0.9. what will be the new quantity demand if price is increased to Rs.33/-.
51. If government introduces a subsidy of Rs.4/- per unit to be paid to the producers
of the good, the new equilibrium price will be
54. Following diagram shows the impacts after imposing unit tax for a certain good. Which
area represent the producer surplus after tax?
55.
56.
57.
a. A c. E+F+H e. H+F+C
b. H d. B+C+E+F
58. Following graph illustrates maintenance of guaranteed price with a deficiency payment
system. What is the net welfare loss accordingly?
f.
g.
h.
60. Assume the price elasticity of demand for bottled water is 0.4. If the price of bottled
water increases by 20%, how much would we expect the quantity of bottled water
demanded to decrease?
a. 4% b. 8% c. 16%
f.
g.
61. According to the graph, if price falls in the A range of the demand curve we can expect
total revenue to
a. increase.
b. decrease.
c. stay the same.
d. decrease, then increase.
e. None of the above are correct
62. If a 6 percent increase in income results in a 10 percent increase in the quantity
demanded of pizza, then the income elasticity of demand for pizza is
a. negative and therefore pizza is an normal good.
b. negative and therefore pizza is a inferior good.
c. positive and therefore pizza is an inferior good.
d. positive and therefore pizza is a normal good.
e. No relationships can be found
f.
g.
h.
63. Which of the following is NOT a determinant of the price elasticity of demand for a
product?
a. time
b. price
c. market definition
d. substitutes
e. none of the above
64. If the demand curve is linear and downward sloping, which of the following would NOT
be correct?
a. The upper part of the demand curve is more elastic than the lower
part.
b. Elasticity will change with a movement down the curve.
c. The lower part of the demand curve would be less elastic than the
upper part.
d. Slope will change with a movement down the curve
e. All of the above are correct
65. ABC Bakery earned Rs.200 in total revenue last month when it sold 100 loaves of bread.
This month it earned Rs.300 in total revenue when it sold 60 loaves of bread. The price
i. a. 0.27.
j. b. 0.58.
k. c. 1.25.
l. d. 1.71.
e. 1.00
m. 40.The government is considering placing a tax on cigarettes to raise revenue
to finance health-care benefits. The demand for cigarettes is price inelastic. Which of
the following statements is TRUE?
a. No tax revenue can be raised in this way because sellers of cigarettes
will just lower their price by the amount of the tax and, therefore, the
price of cigarettes to consumers will not change.
b. This tax will not raise much revenue either in the short term or the long
term since demand is price inelastic.
c. The tax on cigarettes may not raise as much revenue as anticipated in
the years to come because the demand for cigarettes is likely to
become more elastic over time.
d. This is a very good way to raise revenue, both in the short term and in
the long term, because there are no substitutes for cigarettes.
e. None of the above are correct
66. You produce jewelry boxes. If the demand for jewelry boxes is elastic and you
want to increase your total revenue, you should
a. increase the price of your jewelry boxes.
b. decrease the price of your jewelry boxes.
c. not change the price of your jewelry boxes.
d. None of the above answers are correct.
e. All of the above are correct
n.
a. o.
s.
u. P v. w. x. y. R z. R aa. Rs
r Rs Rs Rs s s 5.
i 2 00
c 3 .
e . 0
0 0
0
ac. S
u
p
p
l
i
e
d
72. According to the table, which of the following would represent a more inelastic supply curve?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the 3 supply curves.
e. All the supply curves are elastic
73. In the long run, the quantity supplied of most goods
a. cannot respond at all to a change in price.
b. cannot respond much to a change in price.
c. can respond substantially to a change in price.
d. will naturally increase regardless of what happens to price.
e. None of the above answers are correct
74. Suppose there is a baseball park with 10,000 seats and a demand for seats in the park as follow:
aj. Referring to the given information, the supply of seats
a. Price b. Quantity a. is perfectly elastic.
per Demande b. is perfectly inelastic.
Tick d c. increases as price increases.
et d. decreases as price increases
e. is elastic
ak.
c. Rs.2 d. 2,000
0 75. Referring to the given information, notice that
lowering the price from Rs.8 to Rs.6 per ticket
decreases revenue by Rs.4,000. In the Rs.6 to Rs.8
e. Rs f. 4,000 price range, demand for baseball tickets must be
16 a. price inelastic
b. price elastic
c. price unit elastic
g. Rs h. 6,000 d. income elastic
12 e. perfectly elastic
i. Rs 8 j. 8,000
k. Rs 6 l. 10,000
m. Rs 4 n. 12,000
o. Rs 2 p. 14,000
76.