Market Equilibrium

Markets can only reach an equilibrium in free-market conditions

• True

• False

Which of the following is not a function of prices in the market?

• Signaling information

• Influencing demand

• Rationing scarce resources

• Giving incentives to consumers and producers

Allocative efficiency is reached when

• Prices are low

• Prices are high

• There is a full employment level of output

• The market is in equilibrium

Community surplus is calculated by

• Adding up producer and consumer surplus

• Dividing consumer surplus by producer surplus

• Dividing consumer surplus by inflation rate

• Multiplying consumer surplus by 2

Social efficiency and allocative efficiency are the same thing

• True

• False

What happens to the equilibrium when there is an increase in the income of consumers?

• Shift to the right

• Shift to the left

What are the functions of the price mechanism?

• To signal information to consumers and producers

• To ration scarce resources

• To decrease inflation

• To shift the equilibrium

What is the situation at price Pe?

• Excess supply

• Excess demand

• Fall in price

• Increased quantity

What does it mean that equilibrium is “self - righting”?

• When moved without disturbance - it will return to its original position

• When moved it will remain in a fixed position

• When moved to the left it shifts right

• It moves to the right

What is represented by the letter A?

• Producer surplus

• Government surplus

• Consumer surplus