3: Microeconomic: the MArket System

Complementary goods exist where:

• the purchase of one good means that a similar good is not purchased

• a number of goods exist, any of which can be purchased to satisfy a need

• one good is free and the other has to be paid for

• the purchase of one good leads to the purchase of another good

How would you describe the supply of agricultural products in the short run?

• completely elastic

• elastic

• inelastic

• impossible to determine

If the government set a maximum price below the market equilibrium price, which of the following will this will lead to?

• excess demand

•   excess supply

• market equilibrium

• none of the above

In the diagram below, what action will suppliers take at the price of Р_high?

• Increase supply to take advantage of the high price       

• Supply the same quantity of goods but at a reduced price

• Supply a reduced quantity of goods but at the same price      

• Decrease price to attract more demand

In the diagram below the equilibrium price for chocolate is P_o and Qo. What will the new equilibrium price be if people's incomes increase and chocolate is a normal good?

• W

• X

• Y

• Z

In the diagram below the equilibrium price for chocolate is P_o and Qo. What will the new equilibrium price be if there is technological progress in the chocolate-making industry?

• W

• X

• Y

• Z

In the diagram below the equilibrium price for chocolate is P_o and Qo. What will the new equilibrium price be if there is an increase in the price of cocoa beans (an ingredient in chocolate)?

• V

• W

• X

• Z

Which of the following goods is most likely to experience large fluctuations in supply due to the lag between change in prices and producers responding to that change?

• Motor vehicles

• Air travel

• Mobile telephones

• Wheat

A rise in the price of a good accompanied by a fail in the quantity sold would result from:

• decrease in supply

• increase in demand

• decrease in demand

• increase in supply

If a firm is enjoying economies of scale, then

• it is suffering from excess capacity

• it must be a monopoly

• it is maximising profits

• unit cost is falling as output rises