Markets and the Price Mechanism Quiz

What is the primary function of the price mechanism in a market economy?

• To set wages for workers

• To determine government policies

• To allocate resources efficiently

• To increase the number of products

Which of the following best describes a market?

• A place where government controls prices

• A location where only farmers sell goods

• Any arrangement that allows buyers and sellers to exchange goods and services

• A building where goods are stored

If the price of strawberries falls significantly what is likely to happen?

• Consumers will buy fewer strawberries

• Strawberry farmers will grow more strawberries

• There will be less demand for strawberries

• Consumers will buy more strawberries

When demand for a product increases and supply remains the same what happens to the price?

• It decreases

• It stays the same

• It increases

• It disappears

In a market economy who determines what goods are produced?

• The army

• Consumers and producers

• Teachers

• The weather

A new video game console becomes very popular. What is the most likely market response?

• Decrease in production

• Price remains unchanged

• Increase in price due to high demand

• Decrease in demand

What happens when a product is in surplus in the market?

• Price usually rises

• Price usually falls

• More consumers buy the product

• Producers increase production

Why do producers respond to price changes?

• To follow government rules

• To meet their customers

• To maximise profit

• To reduce taxes

Which of these is an example of a market signal?

If a drought affects wheat crops across the country what is the likely outcome?

• Wheat prices fall

• Wheat production increases

• Wheat prices rise due to lower supply

• No effect on market