AS Demand & Supply

A market is in equilibrium at price $5. Market supply changes from being inelastic at each price to become elastic at each price. The market equilibrium price does not change.

What is the effect on consumer surplus and producer surplus?

• A

• B

• C

• D

The table shows the price Rashid is willing to pay for successive bottles of water.

If the price is $0.50 and Rashid buys four bottles, what is the monetary value of Rashid's consumer surplus?

• $0.15

• $0.85

• $0.90

• $1.35

In which situation will it be necessary to use an alternative to the price mechanism to allocate a good between consumers?

• Supply exceeds the quantity demanded at the initial market price.

• The government sets a price ceiling below the equilibrium price.

• The product is excludable and rival.

• There is a single monopoly producer.

There is a fall in the world price of tea traded on wholesale international markets.

How will this most likely affect the supply curve of a major tea retailer?

• It will cause a contraction along the supply curve.

• It will cause an extension along the supply curve.

• It will cause the supply curve to shift to the left.

• It will cause the supply curve to shift to the right.

What distinguishes the very long run from long run?

• The ability to change resource allocation

• The ability to change the state of technology

• The absence of government market intervention

• The existence of variable factors of production

The diagram shows the market for heating oil.

If the government introduces a production subsidy, how will the financial benefit be shared between consumers and producers?

• it will be shared equally between producer and consumer

• it will go entirely to the producer

• the majority will go to the consumer

• the majority will go to the producer

In the diagram, S1 is the original supply curve and D is the original demand curve.

If supply shifts to S2, which area represents the change in consumer surplus?

• PQVT

• PQW

• PRVT

• TVW

What does not happen when price acts as a means to allocate resources?

• Price determines the supply of public goods

• Price operates in the markets for both goods and factors of production

• Price recognizes consumers' ability to pay rather than consumers' needs

• Price signals to the producers which goods are most profitable

Consumer X is the largest of five consumers and buys 50% of sales.

The table shows the quantity of the goods demanded by consumer X and the market supply of the good.

• $4

• $6

• $8

• $10

Refer to the image.

• A

• B

• C

• D