Market Equilibrium: A Comprehensive Guide for Economics Students

Question 1

If the demand for apples in a perfectly competitive market increases, what happens to the equilibrium price and quantity?

Accepted Answer

Price increases, quantity increases.

Answer

Price increases, quantity decreases.

Answer

Price decreases, quantity decreases.

Question 2

What factor would cause the supply curve in a market to shift to the right?

Accepted Answer

A technological advancement that reduces production costs

Answer

An increase in the price of raw materials

Answer

Several firms leaving the market

Question 3

In a perfectly competitive market, which factor would cause the supply curve to shift to the right?

Accepted Answer

An increase in the number of suppliers

Answer

A fall in the price of a substitute good

Answer

A natural disaster that damages production facilities

Question 4

In a perfectly competitive market, what primarily determines the equilibrium price?

Accepted Answer

The balance of how much buyers want and how much sellers offer

Answer

How responsive buyers and sellers are to price changes

Answer

Actions taken by the government

Question 5

The point where the supply and demand curves intersect is known as the:

Accepted Answer

Equilibrium point

Answer

Disequilibrium point

Answer

Surplus point

Answer

Shortage point

Question 6

Which of the following is NOT a potential cause of market failure?

Accepted Answer

Perfect competition

Answer

Monopolies

Answer

Externalities

Answer

Public goods

Question 7

If the government sets a price ceiling below the equilibrium price in a market, what is likely to occur?

Accepted Answer

A shortage

Answer

A surplus

Answer

Equilibrium will be maintained

Question 8

The calculation for price elasticity of demand is:

Accepted Answer

Percentage change in quantity demanded divided by percentage change in price

Answer

Total change in quantity demanded divided by total change in price

Answer

Percentage change in price divided by percentage change in quantity demanded

Question 9

If the demand for a good is inelastic, what happens when the price changes?

Accepted Answer

There is a relatively small change in quantity demanded

Answer

The change in quantity demanded is unpredictable

Answer

There is no change in quantity demanded

Answer

There is a relatively large change in quantity demanded

Question 10

Which of the following factors would cause a leftward shift in the supply curve?

Accepted Answer

A decrease in the number of suppliers

Accepted Answer

An increase in the cost of production

Answer

An increase in the price of a substitute good

Answer

An improvement in technology

Question 11

Which of the following conditions is essential for a market to be in equilibrium?

Accepted Answer

Quantity supplied is equal to quantity demanded

Answer

Price is at its highest level

Answer

Producers are willing to sell more than consumers are willing to buy

Answer

There is a shortage of goods

Question 12

What happens when demand for a product increases, assuming all other factors remain constant?

Accepted Answer

Both equilibrium price and quantity will increase

Answer

Equilibrium price will increase, but quantity will decrease

Answer

Both equilibrium price and quantity will decrease

Answer

Equilibrium price will decrease, but quantity will increase

Question 13

Which of the following factors would lead to a decrease in a product's supply?

Accepted Answer

An increase in production costs

Answer

Favorable weather conditions

Answer

An advancement in technology

Answer

A decrease in consumer demand

Question 14

What is the term used to describe the point where the supply and demand curves meet?

Accepted Answer

Equilibrium point

Answer

Surplus point

Answer

Disequilibrium point

Answer

Shortage point

Question 15

What is the primary purpose of a supply and demand diagram?

Accepted Answer

To graphically represent the relationship between price and quantity in a market

Answer

To predict future market trends

Answer

To determine the exact price and quantity of a specific product

Question 16

What impact does technological advancement typically have on the supply curve?

Accepted Answer

Rightward shift

Answer

Downward shift

Answer

Leftward shift

Answer

No shift

Question 17

In which scenario is there a market surplus?

Accepted Answer

Quantity supplied exceeds quantity demanded

Answer

Consumers are willing to pay less than producers are willing to sell

Answer

Price is higher than the equilibrium price

Answer

Quantity demanded exceeds quantity supplied

Question 18

Which of the following is NOT a determinant of equilibrium in a market?

Accepted Answer

Government regulations

Answer

Demand

Answer

Price and quantity

Answer

Supply

Question 19

At equilibrium in a market, the quantity supplied is:

Accepted Answer

Equal to the quantity demanded

Answer

Less than the quantity demanded

Answer

Greater than the quantity demanded

Answer

Always changing

Question 20

What is the likely impact of an increase in consumer income?

Accepted Answer

A shift in the demand curve to the right

Answer

No effect on equilibrium

Answer

An increase in equilibrium quantity and a decrease in equilibrium price

Answer

A shift in the supply curve to the left

Question 21

What is the effect of a decrease in the cost of production?

Accepted Answer

A shift in the supply curve to the right

Answer

A shift in the demand curve to the left

Answer

No effect on equilibrium

Answer

A decrease in equilibrium quantity and an increase in equilibrium price

Question 22

Which event can cause a surplus in a market?

Accepted Answer

An increase in supply with no change in demand

Answer

A decrease in supply and an increase in demand

Answer

A decrease in demand and a decrease in supply

Answer

An increase in demand with no change in supply

Question 23

How does a government subsidy for producers likely affect market equilibrium?

Accepted Answer

Increased equilibrium quantity and a lower equilibrium price

Answer

Decreased equilibrium quantity and a higher equilibrium price

Answer

A higher equilibrium price with no change in equilibrium quantity

Question 24

What does a perfectly elastic supply curve indicate?

Accepted Answer

Producers can supply any quantity at the given price

Answer

Producers will supply only a limited quantity at the given price

Answer

Producers will not supply any quantity below the given price

Question 25

Which of the following is a feature of a market in equilibrium?

Accepted Answer

Neither price nor quantity has a tendency to change

Answer

There is a shortage of goods

Answer

There is a surplus of goods

Question 26

What may occur when both demand and supply increase?

Accepted Answer

Increased equilibrium quantity and equilibrium price may or may not change

Answer

Increased equilibrium price and decreased equilibrium quantity

Answer

Decreased equilibrium quantity and increased equilibrium price

Question 27

Equilibrium in a market is achieved when:

Accepted Answer

Quantity supplied is equal to quantity demanded

Answer

Demand exceeds supply

Answer

Price is above equilibrium

Answer

Supply exceeds demand

Question 28

If the price of a good increases, what will generally happen to the quantity demanded?

Accepted Answer

It will decrease

Answer

It is uncertain

Answer

It will increase

Answer

It will remain the same

Question 29

Which of the following is NOT a factor that influences the supply of a good?

Accepted Answer

Tastes and preferences of consumers

Answer

Number of producers

Answer

Technology

Answer

Cost of production

Question 30

A technological advancement that lowers production costs will cause:

Accepted Answer

Equilibrium price to fall and equilibrium quantity to rise

Answer

Equilibrium price to rise and equilibrium quantity to rise

Answer

Equilibrium price to fall and equilibrium quantity to remain constant

Answer

Equilibrium price to rise and equilibrium quantity to fall

Question 31

A market is in disequilibrium when:

Accepted Answer

Quantity supplied does not equal quantity demanded

Answer

Price is at equilibrium

Answer

Quantity supplied is less than quantity demanded

Question 32

A government subsidy on the production of a good will:

Accepted Answer

Shift the supply curve to the right

Answer

Shift the demand curve to the left

Answer

Shift the supply curve to the left

Answer

Shift the demand curve to the right

Question 33

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

Numerous buyers and sellers

Answer

Barriers to entry

Answer

Differentiated products

Answer

Few buyers and sellers

Question 34

In a monopoly market structure, the equilibrium price will be:

Accepted Answer

Typically higher than in a perfectly competitive market

Answer

Impossible to determine

Answer

Typically lower than in a perfectly competitive market

Answer

The same as in a perfectly competitive market

Question 35

Which of the following may be a potential benefit of price controls?

Accepted Answer

Protecting consumers from excessively high prices

Answer

Eliminating the possibility of market failure

Answer

Improving overall economic efficiency

Answer

Fostering innovation

Question 36

If demand for a product rises while supply remains unchanged, what will happen to the equilibrium price?

Accepted Answer

It will increase

Answer

It will stay the same

Answer

It is unclear

Answer

It will decrease

Question 37

In a competitive market, what is the role of equilibrium price?

Accepted Answer

To efficiently allocate resources by balancing supply and demand

Answer

To minimize consumer satisfaction

Answer

To maximize profits for businesses

Question 38

If a price ceiling is set below the equilibrium price, what is a potential consequence?

Accepted Answer

A shortage of the product

Answer

A surplus of the product

Answer

No impact on the market

Question 39

Which factor is likely to increase the elasticity of demand for a product?

Accepted Answer

The presence of close substitutes

Answer

A low price for the product

Answer

Strong brand loyalty

Answer

A large proportion of income spent on the product

Question 40

If the government grants a subsidy to producers of a specific good, what is a probable effect on the equilibrium quantity?

Accepted Answer

It will increase

Answer

It will decrease

Answer

It will remain unchanged

Answer

It cannot be determined

Question 41

In a perfectly competitive market, what is the condition for a firm to maximize its profit?

Accepted Answer

Marginal cost equals marginal revenue

Answer

Fixed cost equals variable cost

Answer

Total cost equals total revenue

Answer

Average cost equals average revenue

Question 42

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Barriers to entry

Answer

Perfect information

Answer

Homogeneous products

Answer

Many buyers and sellers

Question 43

What is the definition of market equilibrium?

Accepted Answer

The point where the quantity supplied equals the quantity demanded at the prevailing market price

Answer

The point where the price is highest

Answer

The point where the quantity supplied is highest

Question 44

What happens when the quantity supplied exceeds the quantity demanded in a market?

Accepted Answer

Price falls

Answer

Quantity supplied increases

Answer

Price rises

Answer

Quantity demanded decreases

Question 45

Which of the following can shift the demand curve to the right?

Accepted Answer

Increase in consumer income

Answer

Decrease in consumer tastes and preferences

Answer

Decrease in the price of a complementary good

Answer

Increase in the price of a substitute good

Question 46

What is the effect of a technological advancement on the supply curve?

Accepted Answer

Shifts it to the right

Answer

Shifts it to the left

Answer

Increases its slope

Answer

Decreases its slope

Question 47

Which of the following is an example of a government policy that acts as a price ceiling?

Accepted Answer

Rent control

Answer

Minimum wage

Answer

Subsidy

Answer

Tax

Question 48

What is the effect of a subsidy on the market equilibrium?

Accepted Answer

Increases quantity supplied, lowers price, and creates producer surplus

Answer

Increases quantity demanded, raises price, and creates consumer surplus

Answer

Decreases quantity supplied, raises price, and creates producer surplus

Answer

Decreases quantity demanded, lowers price, and creates consumer surplus

Question 49

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

Many buyers and sellers, homogeneous products, and freedom of entry and exit

Answer

Few buyers and many sellers

Answer

Many buyers and few sellers

Question 50

What happens to consumer surplus when the price of a good falls?

Accepted Answer

Increases, as consumers can now buy more of the good at a lower price

Answer

Becomes negative, as consumers now have to pay more for the same amount of the good

Answer

Remains the same, as the fall in price is offset by the reduction in quantity consumed

Answer

Decreases, as consumers face a lower price and must buy less of the good

Question 51

Which of the following is an example of an externality?

Accepted Answer

Pollution

Answer

Changes in technology

Answer

Tastes and preferences

Answer

Government intervention

Question 52

What is the role of the government in addressing market failures?

Accepted Answer

To implement policies that promote efficiency, such as taxes or subsidies, and to protect the environment

Answer

To subsidize all industries to ensure profitability

Answer

To abolish free markets and implement central planning