Market Equilibrium and the Price Mechanism
164 questions· page 1 of 17
The quantity demanded of a product is given by QD = 400 - 10P, when P is the price in dollars. Supply of the product is fixed at 100 units.
If the price is $20, what will be the position in the market?
Options
A It will be in disequilibrium with excess demand of 100 units.
B It will be in disequilibrium with excess supply of 100 units.
C It will be in equilibrium with 100 units traded.
D It will be in equilibrium with 200 units traded.
The diagram shows the impact of a government introducing an export subsidy for its domestic producers of oil.
What will be the effect of this export subsidy on the operation of the domestic market?
Options
A domestic output of oil will increase by 15 million units
B imports of oil will decrease by 25 million units
C the domestic price of oil will decrease by $28
D the domestic price of oil will increase by $8
What is not a function of the price mechanism?
Options
A to act as a signal to firms when allocating resources
B to maximise consumer surplus
C to provide an incentive to firms to produce goods
D to ration scarce resources
Cars and petrol (gasoline) are in joint demand.
What is the effect of an increase in the price of cars on the demand for petrol?
Options
Farmers want to extract wild honey from beehives. They find the beehives by following birds known as honeyguide birds who want the beeswax that is also found in the beehives.
What does this suggest?
Options
A Farmers and honeyguide birds are rival consumers.
B Wild honey and beeswax are free goods.
C Wild honey and beeswax are in joint supply.
D Wild honey is the opportunity cost of beeswax.
The diagram shows the demand and supply for rice.
The market for rice is initially in equilibrium at a price of P1. The government introduces a maximum price of Pmax. At the same time the supply of rice increases.
What is the impact of these changes on the market for rice?
Options
A A new market equilibrium will be established.
B An illegal market for rice will develop.
C There will be a shortage of rice.
D There will be a surplus of rice.
In the diagram, D is the demand curve of an agricultural commodity and S is the initial supply curve.
The government promises to maintain farmers’ incomes at least at this initial level. The harvests in four subsequent years are shown by supply curves S1–S4.
How much in total will the government need to pay to support farmers over the four subsequent years?
Options
A $0
B $3000
C $6000
D $10 000
The table shows the supply and demand for avocados in kilograms (kg).
| price per kg ($) | quantity demanded per day (kg) | quantity supplied per day (kg) |
|---|---|---|
| 45 | 170 | 230 |
| 40 | 190 | 190 |
| 35 | 210 | 150 |
| 30 | 230 | 110 |
As a result of lower transport costs, supply rises by 60 kg at all prices.
What is the new equilibrium price?
Options
A $45
B $40
C $35
D $30
The price of laptop computers falls.
The price of which product is likely to rise as a result?
Options
A desktop computers
B carrying cases for laptop computers
C monitors for desktop computers
D workstation tables for desktop computers
Which statement defines market equilibrium?
Options
A when ceteris paribus no longer applies
B when quantity demanded equals quantity supplied
C when quantity demanded is equal to price
D when supply can no longer expand