#1
Which of the following statements best describes market equilibrium?
It is the point where quantity demanded equals quantity supplied.
ExplanationEquilibrium is where demand meets supply.
#2
What happens to market equilibrium price and quantity when demand increases?
Price increases, quantity increases.
ExplanationRising demand drives up both price and quantity.
#3
What does a surplus indicate in a market?
Quantity supplied exceeds quantity demanded.
ExplanationMore goods are supplied than demanded.
#4
In which scenario will price elasticity of demand likely be higher?
When there are many substitutes available.
ExplanationAvailability of substitutes increases elasticity.
#5
What is the effect of a price ceiling set below the market equilibrium price?
It causes a shortage.
ExplanationShortage results from price restriction.
#6
How does a perfectly competitive market reach equilibrium?
Through adjustments in both supply and demand.
ExplanationEquilibrium via supply and demand balance.
#7
What happens to market equilibrium if both demand and supply increase simultaneously?
Equilibrium price increases, equilibrium quantity may increase or decrease.
ExplanationPrice rises; quantity may fluctuate.
#8
In a perfectly competitive market, what is the relationship between marginal cost and price at equilibrium?
Marginal cost equals price.
ExplanationMarginal cost aligns with price.
#9
How does an increase in income affect the demand for inferior goods?
Demand decreases.
ExplanationSuperior goods become more desirable.
#10
What factor might cause a shift in the supply curve?
Change in technology.
ExplanationTechnological advancements affect supply.
#11
What is the main determinant of the price elasticity of supply?
Time period considered.
ExplanationElasticity influenced by time horizon.
#12
What effect does a technological advancement in production have on market equilibrium?
Shifts the supply curve to the right.
ExplanationTechnological progress boosts supply.
#13
In a monopolistic market, what happens to price and quantity compared to a perfectly competitive market?
Price is higher and quantity is lower.
ExplanationMonopoly leads to higher prices, lower quantity.
#14
What is the primary factor that determines the price elasticity of demand?
Availability of substitutes.
ExplanationSubstitutes influence demand elasticity.
#15
In a monopolistic competition, how do firms differentiate their products?
By advertising and product differentiation.
ExplanationDiverse marketing and product features.
#16
What factor determines the elasticity of supply for most goods?
The time horizon considered.
ExplanationSupply elasticity varies with time.