#1
Which of the following best defines the price mechanism?
A government-controlled system of setting prices
The process through which prices are determined by the forces of supply and demand
A fixed pricing system enforced by monopolies
A system where prices are arbitrarily set by sellers
#2
What happens to the equilibrium price and quantity when demand increases?
Equilibrium price increases, equilibrium quantity decreases
Equilibrium price decreases, equilibrium quantity increases
Equilibrium price and quantity both increase
Equilibrium price and quantity both decrease
#3
What is the law of demand?
As the price of a good increases, the quantity demanded increases
As the price of a good increases, the quantity demanded decreases
As the price of a good decreases, the quantity demanded increases
As the price of a good decreases, the quantity demanded decreases
#4
Which of the following is NOT a determinant of supply?
Input prices
Technology
Consumer preferences
Number of suppliers
#5
What is a market equilibrium?
A situation where there is excess demand in the market
A situation where there is excess supply in the market
A situation where quantity demanded equals quantity supplied
A situation where the government intervenes to set prices
#6
Which of the following is a determinant of demand?
Production costs
Input prices
Consumer income
Number of producers
#7
What is the law of supply?
As the price of a good increases, the quantity supplied decreases
As the price of a good increases, the quantity supplied increases
As the price of a good decreases, the quantity supplied increases
As the price of a good decreases, the quantity supplied decreases
#8
Which of the following is a determinant of supply?
Consumer income
Price of substitutes
Consumer preferences
Number of sellers
#9
What is market equilibrium?
A situation where demand exceeds supply
A situation where supply exceeds demand
A situation where quantity demanded equals quantity supplied
A situation where quantity supplied equals quantity demanded
#10
In economics, what does elasticity of demand measure?
How sensitive quantity demanded is to a change in price
How much demand fluctuates over time
The price at which demand becomes infinite
The degree of consumer satisfaction with a product
#11
What is a price ceiling?
The highest price a seller can legally charge for a product
A government-imposed maximum price that can be charged for a product
The price at which supply and demand are in perfect balance
The lowest price a seller is willing to accept for a product
#12
What is a price floor?
The highest price a seller can legally charge for a product
A government-imposed maximum price that can be charged for a product
The lowest price a seller is willing to accept for a product
A government-imposed minimum price that must be paid for a product
#13
What is the main difference between a perfectly competitive market and a monopoly?
In a perfectly competitive market, there are many buyers and sellers, while a monopoly has only one seller
In a perfectly competitive market, prices are determined by supply and demand, while a monopoly can set prices
In a perfectly competitive market, there are barriers to entry, while a monopoly has no barriers to entry
In a perfectly competitive market, products are differentiated, while a monopoly sells identical products
#14
What is a market shortage?
A situation where quantity demanded exceeds quantity supplied
A situation where quantity supplied exceeds quantity demanded
A situation where prices are set above equilibrium
A situation where there is no scarcity in the market
#15
What is the relationship between price elasticity of demand and total revenue?
They are always inversely related
They are always directly related
They are unrelated
They have an inverse relationship only in some cases
#16
What is a market surplus?
A situation where quantity demanded exceeds quantity supplied
A situation where quantity supplied exceeds quantity demanded
A situation where prices are set below equilibrium
A situation where there is no scarcity in the market
#17
What is the income elasticity of demand for a normal good?
Positive
Negative
Zero
Indeterminate
#18
Which of the following factors does NOT affect demand?
Consumer income
Price of substitutes
Price of complements
Technology
#19
What does the price elasticity of demand measure?
How much demand changes in response to a change in price
How much supply changes in response to a change in price
How much demand changes in response to a change in income
How much demand changes in response to a change in consumer preferences
#20
Which factor does NOT typically influence the elasticity of demand for a product?
Availability of substitutes
Necessity of the product
Income level of consumers
The cost of production
#21
What is price discrimination?
A situation where sellers offer discounts to loyal customers
The practice of charging different prices to different consumers for the same product
A government-imposed restriction on pricing strategies
A situation where prices are set below production costs to drive competitors out of the market
#22
What is the formula for price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
Percentage change in price / Percentage change in quantity demanded
Absolute change in quantity demanded / Absolute change in price
Absolute change in price / Absolute change in quantity demanded
#23
What is a Giffen good?
A good for which demand decreases as income increases
A good for which demand increases as price increases
A good for which demand decreases as price decreases
A good for which demand increases as substitutes become available
#24
What happens to equilibrium price and quantity when demand increases and supply decreases?
Equilibrium price increases, equilibrium quantity decreases
Equilibrium price decreases, equilibrium quantity increases
Equilibrium price and quantity both increase
Equilibrium price and quantity both decrease