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CBSE Questions for Class 11 Commerce Economics Market Equilibrium Quiz 4 - MCQExams.com
CBSE
Class 11 Commerce Economics
Market Equilibrium
Quiz 4
The consumer surplus of a product represent.
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Excess of demand price over price paid
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Excess of price over cost of production
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Excess of demand price of equilibrium price
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Demand price minus taxes
The difference between what the consumer is prepared to pay and what the actually pays is called ________.
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Producer surplus
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Consumer surplus
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Normal profit
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Abnormal profit
If the price of a video rental is below the equilibrium price, the quantity supplied is __________ than the quantity demanded. If the price of video rental is above the equilibrium price, the quantity supplied is _________ than the quantity demanded.
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greater; less
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greater; greater
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less; greater
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less; less
Explanation
When the quantity supplied is equal to the quantity demanded it is called equilibrium point. When the price floor is above the equilibrium price, the quantity supplied will exceed the quantity demanded also will create surplus and vice versa. Hence, if the price of the video rental is blow the equilibrium price, the quantity supplied is less than the quantity demanded and if the price of video rental is above the equilibrium price, the quantity supplied is greater than the quantity demanded.
An increase in supply is illustrated by a ___________ shift in the market supply curve and will occur when __________.
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right; input costs fall or an improvement in technology occurs
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left; firms exit the industry, leaving more business for the remaining firms
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left; firms attempt to increase selling prices in response to a higher price paid for a major input to the production process
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right; the price of the product increases
Explanation
An increase in supply refers to a situation when the producers are willing to supply a larger quantity of the commodity at the same price or same quantity at lower prices.
In the given case increase in supply that is changes due to other factor so supply curve will shift right.
Hence option a is correct.
An increase in the demand for computers and an increase in the number of sellers of computers will __________.
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increase the number of computers bought
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decrease the price but increase the number of computers bought
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increase the price of a computer
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increase the price and the number of computers bought
Explanation
An increase in demand foe computers and increase in number of sellers of computers will decrease the number of computers bought. This is because the supply and demand have increased and the quantity demanded will also increase to achieve equilibrium.
Shifts in the supply curve, all other things remaining constant, leads to ___________.
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An increase in the market equilibrium price if the shift is due to an decrease in supply
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An increase in the market equilibrium price if the shift is due to an increase in supply
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A decrease in the market equilibrium price if the shift is due to an increase in supply
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Both (A) & (C)
Suppose that, at the profit-maximizing level of output, a firm finds that market price is less than average total cost, but greater than average variable cost. Which of the following statements is correct?
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The firm should shutdown in order to minimise its losses.
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The firm should raise its price enough to cover its losses
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The firm should move its resources to another industry.
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The firm should continue to operate in the short run.
Explanation
When P> AVC but P < ATC, here the firm is able to recover its variable costs even though it is incurring the loss of fixed cost. It should continue to operate in short run in order to minimize its losses.
Suppose that the supply of cameras films increases due to an increase in foreign imports of camera films. Which of the following will most likely occur?
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The equilibrium price of cameras will increase.
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The equilibrium quantity of cameras will decrease.
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The equilibrium price of camera will decrease.
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The equilibrium quantity of camera film will increase.
Explanation
If the supply of camera films increase due of foreign imports of camera films the equilibrium quantity of camera films will increase as the supply is increasing. There also might be a slight decrease in the price of camera films if the forces are to come back to equilibrium.
Buyers cannot exercise high bargaining power over their suppliers if ________.
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the volume they buy accounts for a large percentage of their suppliers' sales
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there are few buyers in the market
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they have many suppliers to choose from
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there is a high concentration of suppliers
Suppose the technology for producing personal computers improves and, at the same time, individuals discover new uses for personal computers so that there is greater utilisation of personal computers. Which of the following will happen to equilibrium price and equilibrium quantity?
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Price will increase; quantity cannot be determined
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Price will decrease; quantity cannot be determined
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Quantity will increase; price cannot be determined
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Quantity will decrease; price cannot be determined
Explanation
When technology improves then supply increased and when individuals discovers new uses then demand increases and as a result of increase in supply and demand the quantity will increase but price can not be determined.
Consumer surplus arises because:
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Consumer has lot of money
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Quality of different units of the same commodity differs
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Consumer receives more than what he pays for
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None of the above
Explanation
Consumer surplus is the excess of amount that the consumer is willing to pay and the amount that the consumer actually pays. Hence, surplus arises because consumer receives more than what he pays for.
A decrease in the demand for cameras keeping other things the same results in ________.
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Increase the number of cameras bought
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Decrease the price but increase the number of cameras bought
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Increase the price of cameras
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Decrease the price and also the number of cameras bought
Explanation
A decrease in demand will decrease the price and quantity. This is due to change in fashion of the consumer, change in fashion leads to falls in demand and price both.
Hence, option D is correct.
Per Unit Price of Commodity X (Rs.)
Quantity Demanded of Commodity X (Units)
Quantity Supplied of Commodity X (Units)
10
50
110
20
60
100
30
70
90
40
80
80
50
90
70
60
100
60
70
110
50
On the basis of the table, equilibrium is attained at price ________.
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20
0%
30
0%
40
0%
50
Explanation
Equilibrium is a state at which the quantity supplied is equal to the quantity demanded. Hence, neither buyers nor sellers want to change their behaviour. They are exact same. Hence, in the given illustration the price at which quantity supplied is equal to the quantity demanded is at Rs.40. Hence, equilibrium is attained at this price.
Shifts in the supply curve, all else remaining constant, lead to _____________.
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An increase in the market equilibrium price if the shift is due to an decrease in supply.
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An increase in the market equilibrium price if the shift is due to an increase in supply.
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A decrease in the market equilibrium price if the shift is due to an increase in supply.
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Both (A) & (C)
Based on the graph given, the answer to the following question is.
If supply shift to Point b or Point c from Point a, it is known as -
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Increase or decrease in supply
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Movement from one supply curve to the other curve
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Both (A) and (B)
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Expansion or contraction in supply
An increase in demand for a normal goods is illustrated a shift in the market demand curve and will occur when _______________.
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Left; prices for substitute goods.
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Right; consumer income rise
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Left; firms raise their prices in response to higher input costs.
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Right; inputs prices fall
When the entire supply curve shifts its position it is called as ___________.
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Increase or decrease in supply
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Movement from one supply curve to the other
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Both (A) and (B)
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Expansion or contraction in supply
On the basis of graph given answer next 3 questions.
If supply shift to Point b or Point c from Point a, it is known as -
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Expansion or contraction in supply
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Movement along supply
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Both (A) and (B)
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Increase or decrease in supply
Distribution and sharing of National Product relates to the problem of.
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What to Produce
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How to Produce
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For whom to Produce
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How to provide for growth
If due to change in 'other things' (determinants), quantity supplied goes downward it is known
as -
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Expansion in supply
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Contraction in supply
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Increase in supply
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Decrease in supply
If there is a price ceiling, which of the following is NOT likely to occur?
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Rationing by first-come first-served basis
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Black markets
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Grey markets
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All sellers providing goods for free that were formerly not free
Explanation
Price ceiling is the maximum price the seller can charge to the customer. Government imposes price ceiling to protect the consumers. Price ceiling will lead to shortage as demand will exceed supply. This leads to black marketing, rationing by fist come first serve. Price ceiling is giving goods at a price that is fixed by government, the supplier cannot charge beyond that price. Hence, some price is charged even it is minimal but is not free of cost. Hence all the statements except D is incorrect.
As income increases, the consumer will go in for superior goods and consequently the demand for inferior goods will fall. This means.
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Income elasticity of demand less than one
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Negative income elasticity of demand
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Zero income elasticity of demand
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Unitary income elasticity of demand
Explanation
In case of inferior goods, there will be negative income elasticity $$(Ey < 0)$$.
When a price floor is above the equilibrium price ________________.
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quantity demanded will exceed quantity supplied
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quantity supplied will exceed quantity demanded
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the market will be in equilibrium
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this is a trick question because price floors generally exist below the equilibrium price
Explanation
When the quantity supplied is equal to the quantity demanded it is called the equilibrium point. When the price floor is above the equilibrium price, the quantity supplied will exceed the quantity demanded as will create surplus supply due to higher price and a simultaneous fall in demand.
When a market is in equilibrium_________.
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No shortages exist
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Quantity demanded equals Quantity supplied
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A price is established that clears the market
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All of the above are correct
Explanation
When market is in equilibrium there is a balance of quantity demanded and quantity supplied are the same. Hence, because quantity demanded = quantity supplied there are no shortages in the market and the price is fixed which clears the market.
Consumer has no consumer surplus on _______ of the commodity consumed.
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first unit
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second unit
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all units
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last unit
Explanation
Consumer has no consumer surplus on last unit of the commodity consumed. This is because consumer surplus is based on the law of diminishing marginal utility.
According to this law, the Marginal utility/satisfaction of the consumer goes on decreasing with every additional consumption of the commodity. Hence, it is because of this law that the consumers willingness to pay for additional unit goes on diminishing and there is no consumer surplus on the last unit.
If a buyer's willingness to pay for a new car is Rs. 200,000 and she is able to actually buy it for Rs. 180,000 her consumer surplus is __________.
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Rs. 18,000
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Rs. 20,000
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Rs. 2,000
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Rs.0.
Explanation
Consumer surplus is the difference between the price that the consumer is willing to pay and the p[rice consumer actually pays.
Therefore,
Consumer surplus = Amount Willing to pay - Amount paid
= 2,00,000 - 1,80,000
= Rs-20,000.
Which is the other name that is given to the average revenue curve?
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Profit Curve
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Demand Curve
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Average Cost Curve
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Indifference Curve
Explanation
Average revenue curve is just like demand curve as the it represents the product's demand. Average revenue is total revenue divided by quantity. Just like demand curve price is represented on the y-axis and quantity on x-axis, Each point on the AFC curve shows the price of the product and the demand of the product at the given price, hence AFC curve is also known as demand curve.
One characteristic not typical of oligopIistic industry is______________.
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Horizontal demand curve
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Too much importance to non-price competition.
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Price leadership.
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A small number of firms in the industry.
Explanation
In oligopolistic industry the demand curve is kinked shape and not a hori
zontal demand curve.
When decrease in demand is equal to increase in supply, equilibrium quantity will ___________.
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rise
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fall
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remain unchanged
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be zero
Explanation
When there is decrease in demand and increase in supply the demand curve moves to the left from DD to D1D1 and the supply curve shifts to the right from SS to S1S1. So, at the new equilibrium point the quantity is not changed but the price will decrease from P to P1 because supply is increased and demand is reduced.
In economics, a state of balance is called ________________.
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saturation point
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stability point
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profit maximising point
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equilibrium point
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