Master Market Equilibrium: Enhance Your Economics Expertise

Question 1

An increase in consumer income will generally cause:

Accepted Answer

A rightward shift in the demand curve

Answer

A leftward shift in the demand curve

Answer

No change in the demand curve

Answer

A decrease in the equilibrium quantity

Question 2

Elasticity of demand measures the:

Accepted Answer

Responsiveness of quantity demanded to changes in price

Answer

Responsiveness of price to changes in quantity demanded

Answer

Responsiveness of supply to changes in price

Answer

Responsiveness of consumer surplus to changes in price

Question 3

In a market with linear demand and supply curves, the equilibrium quantity is found at the point where:

Accepted Answer

The demand and supply curves intersect

Answer

The demand curve intersects the x-axis

Answer

The supply curve intersects the y-axis

Answer

The midpoint between the x- and y-intercepts of the supply curve

Question 4

A deadweight loss in a market occurs when:

Accepted Answer

Actual output is less than the socially optimal output

Answer

Actual output is more than the socially optimal output

Answer

Prices are below the equilibrium level

Answer

Prices are above the equilibrium level

Question 5

Which policy is likely to increase consumer surplus?

Accepted Answer

Consumption tax reduction

Answer

Price floor above the equilibrium price

Answer

Price ceiling below the equilibrium price

Answer

Production subsidy

Question 6

Externalities refer to:

Accepted Answer

Costs or benefits of production or consumption not reflected in market prices

Answer

Government regulations affecting markets

Answer

Interactions between different markets

Answer

Price elasticity of demand and supply

Question 7

In a perfectly competitive market, when the quantity supplied exceeds the quantity demanded, what occurs?

Accepted Answer

Price falls, reducing quantity supplied until it matches quantity demanded.

Answer

Price rises, increasing quantity demanded until it matches quantity supplied.

Answer

Market remains balanced, with no price or quantity changes.

Answer

Government sets a minimum price, eliminating excess supply.

Question 8

A natural disaster has decimated production facilities in a specific industry. How will this event likely affect the supply curve for goods produced in this industry?

Accepted Answer

Shift to the left

Answer

Shift to the right

Answer

Remain unchanged

Answer

Become steeper

Question 9

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

Accepted Answer

Numerous buyers and sellers

Answer

Slightly differentiated products

Answer

Barriers to entry and exit

Answer

Individual buyers and sellers setting prices

Question 10

What is the likely impact of a technological advancement that lowers production costs on supply?

Accepted Answer

Increased supply

Answer

Decreased supply

Answer

No change in supply

Answer

Unpredictable change in supply

Question 11

Which of the following is an example of a price ceiling?

Accepted Answer

Rent control

Answer

Minimum wage

Answer

Tariffs

Answer

Subsidies

Question 12

How does an excise tax differ from a sales tax?

Accepted Answer

An excise tax is levied on production, while a sales tax is levied on consumption

Answer

A sales tax is levied on production, while an excise tax is levied on consumption

Answer

There is no difference between an excise tax and a sales tax

Answer

An excise tax is levied on producers, while a sales tax is levied on consumers

Question 13

Which of the following is NOT a factor that can shift the demand curve?

Accepted Answer

Changes in technology affecting supply

Answer

Changes in consumer preferences

Answer

Changes in the price of a substitute good

Answer

Changes in consumer income

Question 14

If a government imposes a price ceiling below the equilibrium price, what is the most likely outcome?

Accepted Answer

Excess demand and shortages

Answer

Excess supply and surpluses

Answer

No change in equilibrium

Answer

An increase in price

Question 15

Which of the following is a characteristic of a market with a high elasticity of supply?

Accepted Answer

Producers can easily adjust output levels to meet changes in demand

Answer

Changes in demand have a minimal impact on price

Answer

Supply is fixed and cannot be increased

Answer

Price is highly responsive to changes in supply

Question 16

In a situation of market inefficiency, what is a key indicator?

Accepted Answer

Price is not equal to marginal cost

Answer

Social welfare is maximized

Answer

Consumers are receiving the maximum utility possible

Answer

Producers are earning the maximum profit possible

Question 17

In a market with a downward-sloping demand curve, an increase in supply will lead to which outcome?

Accepted Answer

A decrease in price and an increase in quantity

Answer

An increase in price and a decrease in quantity

Answer

An increase in both price and quantity

Answer

A decrease in both price and quantity

Question 18

In a perfectly competitive market, the level of production that maximizes profit for a firm occurs when:

Accepted Answer

Marginal cost is equal to marginal revenue

Answer

Total revenue is equal to total cost

Answer

Average revenue is greater than average cost

Answer

Input costs are at their lowest

Question 19

In a perfectly competitive market, the equilibrium price is determined by the intersection of:

Accepted Answer

Supply and demand curves

Answer

Supply curve and marginal cost curve

Answer

Demand curve and marginal revenue curve

Answer

Marginal cost curve and marginal revenue curve

Question 20

Which of the following shifts the supply curve to the left (i.e., causes a decrease in supply)?

Accepted Answer

Increase in input costs

Answer

Technological advancement

Answer

Decrease in demand

Answer

Government subsidies

Question 21

A price ceiling below the equilibrium price will most likely lead to:

Accepted Answer

Shortage

Answer

Surplus

Answer

No change in quantity

Answer

Increased efficiency

Question 22

The elasticity of demand measures the responsiveness of quantity demanded to changes in:

Accepted Answer

Price

Answer

Income

Answer

Advertising expenditure

Answer

Government regulations

Question 23

A Giffen good is characterized by a:

Accepted Answer

Negative income elasticity of demand

Answer

Positive income elasticity of demand

Answer

Positive cross-price elasticity of demand

Answer

Negative cross-price elasticity of demand

Question 24

Which of the following is a characteristic of an economically efficient market?

Accepted Answer

Optimal allocation of resources

Answer

Equitable distribution of income

Answer

Government intervention

Answer

Price discrimination

Question 25

Consumer surplus refers to:

Accepted Answer

The difference between the price paid and the maximum price consumers are willing to pay

Answer

The difference between the price received and the minimum price producers are willing to accept

Answer

The total revenue earned by producers

Answer

The total expenditure incurred by consumers

Question 26

The Laffer curve illustrates the relationship between:

Accepted Answer

Tax rates and tax revenue

Answer

Government spending and economic growth

Answer

Inflation and unemployment

Answer

Interest rates and exchange rates

Question 27

Which of the following is NOT a primary determinant of market demand?

Accepted Answer

Government regulations

Answer

Consumer preferences

Answer

Consumer income

Answer

Number of buyers

Question 28

Which government intervention can potentially lead to a market surplus?

Accepted Answer

Establishment of a price floor above the equilibrium price

Answer

Imposition of a price ceiling below the equilibrium price

Answer

Provision of subsidies to producers

Answer

Imposition of taxes on consumers

Question 29

In a perfectly competitive market, firms are characterized as:

Accepted Answer

Price takers

Answer

Having significant market power

Answer

Able to set prices above marginal cost

Answer

Operating at their minimum average cost

Question 30

Consumer surplus is defined as:

Accepted Answer

The difference between what consumers are willing to pay and what they actually pay

Answer

The difference between what producers are willing to produce and what they actually produce

Answer

The total utility consumers derive from consumption of a good

Answer

The total profit earned by firms in a market

Question 31

In a perfectly competitive market, when supply exceeds demand, the equilibrium price will:

Accepted Answer

Fall

Answer

Remain the same

Answer

Rise

Answer

Fluctuate erratically

Question 32

Which of the following is a characteristic of market inefficiency?

Accepted Answer

Deadweight loss

Answer

Perfect competition

Answer

Consumer surplus

Answer

Equilibrium price

Question 33

The elasticity of demand measures the:

Accepted Answer

Responsiveness of quantity demanded to changes in price

Answer

Slope of the supply curve

Answer

Total revenue generated by a firm

Question 34

Which of the following is a factor that can shift the supply curve to the left in a perfectly competitive market?

Accepted Answer

Increase in input costs

Answer

Decrease in the number of buyers

Answer

Increase in consumer demand

Answer

Technological innovation

Question 35

In a market with a surplus, the:

Accepted Answer

Quantity supplied is greater than the quantity demanded

Answer

Equilibrium price is above the market price

Answer

Quantity demanded is greater than the quantity supplied

Question 36

Which of the following is a benefit of market equilibrium in a perfectly competitive market?

Accepted Answer

Efficient allocation of resources

Answer

Market failure

Answer

Government intervention

Question 37

The concept of market equilibrium in a perfectly competitive market is based on the assumption of:

Accepted Answer

Perfect competition

Answer

Monopolistic competition

Answer

Oligopoly

Answer

Government intervention

Question 38

In a perfectly competitive market, which of the following is NOT a tool that governments can use to intervene in the market?

Accepted Answer

Educational campaigns

Answer

Price ceilings

Answer

Subsidies

Question 39

In a perfectly competitive market, the equilibrium price is determined by the:

Accepted Answer

Intersection of supply and demand curves

Answer

Market share of the largest firm

Answer

Price elasticity of demand

Answer

Government intervention

Question 40

Which of the following is NOT a determinant of the elasticity of demand?

Accepted Answer

Consumer preferences

Answer

Proportion of income spent on the good

Answer

Price of the good

Answer

Availability of substitutes

Question 41

If a price ceiling is set below the equilibrium price, the likely outcome is:

Accepted Answer

Shortage

Answer

Surplus

Answer

An increase in equilibrium price

Answer

No change in quantity

Question 42

Which of the following is a characteristic of an efficient market?

Accepted Answer

Resources are allocated to their most productive uses

Answer

Consumers have incomplete information

Answer

There are barriers to entry and exit

Question 43

Which of the following would lead to a shift in the demand curve to the left?

Accepted Answer

Decrease in consumer income

Answer

Increase in the price of a substitute good

Answer

Decrease in the price of a complementary good

Answer

Technological advancement reducing production costs

Question 44

The concept of consumer surplus refers to:

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay

Answer

The total revenue received by producers

Answer

The amount consumers spend on a good

Question 45

Which of the following is a measure of the responsiveness of quantity supplied to a change in price?

Accepted Answer

Price elasticity of supply

Answer

Own-price elasticity of demand

Answer

Income elasticity of demand

Answer

Cross-price elasticity of demand

Question 46

In a monopoly, the marginal revenue curve is:

Accepted Answer

Below the demand curve

Answer

Above the demand curve

Answer

Equal to the demand curve

Answer

Negative

Question 47

Which of the following is a benefit of market equilibrium?

Accepted Answer

Efficient allocation of resources

Answer

Complete elimination of market competition

Answer

Guaranteed profits for producers

Answer

Prevention of consumer surplus

Question 48

The equilibrium quantity in a market is the quantity at which:

Accepted Answer

Supply equals demand

Answer

Demand is greater than supply

Answer

Supply is greater than demand

Answer

Total revenue is maximized