C3 : SET 3 - MARKET EQUILIBRIUM

What is the meaning of ‘Ceiling Price’?

• The government imposes a maximum price that prevents certain prices from rising above that price.

• The government sets a minimum price that prevents certain prices from falling below that price.

• The government provides incentives to the seller or producer to produce more goods.

• The government imposes a certain amount to be produced by the seller or producer.

At equilibrium price, ____________________.

• quantity supply may exceed quantity DD or vice-versa.

• there are no pressures upon price to either rise or fall.

• there are forces which tend to cause price to rise.

• there are forces which tend to cause price fall.

Price is currently above equilibrium. This will create excess__________. We would expect price to ___________.

• demand; increase

• demand; decrease

• supply; increase

• supply; decrease

If there is a surplus of product X, we can predict that

_________________.

• fewer resources will be allocated to the production of this good.

• the price will rise.

• the price will decline.

• the supply curve will shift to the left and the demand curve to the right thereby, eliminating the shortage.

The most important characteristic of the equilibrium price is that it ________________.

• guarantees that producers earn profit.

• ensures the market has no shortage or surplus.

• maximizes the quantity demand.

• minimizes the quantity demand.

If a product is in shortage, we can conclude that its price _______________.

• is below the equilibrium level.

• is above the equilibrium level.

• will fall in the near future.

• is in equilibrium.

An increase in consumers’ income, will _________________.

• increase equilibrium quantity and decrease equilibrium price.

• increase equilibrium price and decrease equilibrium quantity.

• increase in both equilibrium price and quantity.

• decrease in both equilibrium price and quantity.

Which of the following statements is incorrect?

• If demand increases and supply decreases, equilibrium price will rise.

• If supply increases and demand increases, equilibrium price will rise.

• If demands decreases and supply increases, equilibrium price will rise.

• If supply declines and demand remains constant, equilibrium price will rise.

A price floor placed on a good is a ___________that will normally results in _________.

• maximum price ; shortage.

• minimum price ; shortage.

• maximum price ; surplus.

• minimum price ; surplus.

If the ceiling price is fixed below the equilibrium price, we can predict that ____________.

• quantity supplied will be less than quantity demanded.

• quantity demanded will decrease.

• quantity supplied will be greater than quantity demanded.

• demand will be less than supply.