Competitive markets - Demand & Supply

The greater the competition in market, the greater the profit

• True

• False

• Neither

D = MB, because ____________

• the greater the quantity of a good consumed, the lesser the benefit derived

• the lesser the quantity of a good consumed, the greater the profits derived

• the greater income distribution takes place

• the greater the quantity of a good consumed, the greater social outcomes

• All of the above

A rightward shift of the demand curve indicates that ________ is demanded for a given price; a leftward shift of the demand curve indicates that ________ is demanded for a given price. A rightward shift of the curve is called an __________ in demand; a leftward shift is called a ________ in demand.

• increase; less; more; decrease

• less; more; decrease; increase

• more; more; decrease; increase

• more; less; increase; decrease

• Increase; less; more; decrease

The following factors are determinants of market demand.

• Income in the case of normal goods.

• Income in the case of inferior goods

• Preferences and tastes

• Prices of substitute goods

• All of above

According to the law of supply, there is a __________ causal relationship between the quantity of a good supplied over a particular time period and its price, ceteris paribus: as the price of the good ________ the quantity of the good supplied also __________; as the price ______, the quantity supplied also _______, - ceteris paribus.

• positive, falls, positive, falls, positive, Increase

• negative, positive, increasing, applied, normative

• positive, increases, increase, falls, falls

• negative, increases, positive, falls, falls

• positive, falls, positive, falls, positive, increase

The non-price determinants of market supply include the following;

• Costs of factors of production

• Marketing

• Competitive supply

• The number of firms

• Access to natural resources

If quantity demanded of a good is smaller than quantity supplied, the difference between the two is called a _______, where there is excess supply; if quantity demanded of a good is larger than quantity supplied, the difference is called a _________', where there is excess demand. The existence of a surplus or a shortage in a free market will cause the price to change so that the quantity demanded will be made equal to quantity supplied. In the event of a shortage, price will __________; in the event of a surplus, price will __________

• shortage; rise; fall; surplus

• surplus; surplus; fall; rise

• fall, surplus; rise; fall

• surplus; shortage; rise; fall

• stay at equilibrium

The condition of scarcity forces society to make choices about the ___________ economic question, which is a resource allocation question. Choices involve an opportunity cost because of foregone (or sacrificed) alternatives that could have been chosen instead.

• for whom to produce

• what to produce

• how to produce

• none of the above

• all of above

The key to the market’s ability to allocate resources can be found in the role of ________ as _________ and ________ as __________. As signals, prices communicate information to decision-makers. As incentives, prices motivate decision-makers to respond to the information.

• prices, incentives, prices, signals

• incentives, prices, signals, prices

• prices, signals, prices, incentives

• signals, prices, incentives, prices

The competitive market realises _________________, producing the combination of goods mostly wanted by society, thus answering the ________________ question in the best possible way. This means ______________is also realised, involving production with the fewest possible resources, thus answering the ___________ question in the best possible way. These conditions are also known as economic efficiency or Pareto optimality.

• productive efficiency, what to produce, how to produce, allocative efficiency

• allocative production, how to produce, productive efficiency, what to produce

• allocative efficiency, what to produce, productive efficiency, how to produce

• perfect competition, demand, supply, production