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CBSE Questions for Class 11 Commerce Economics Market Equilibrium Quiz 6 - MCQExams.com
CBSE
Class 11 Commerce Economics
Market Equilibrium
Quiz 6
In a situation when productivity increases owing to improvement in technology, equilibrium price tends fall.
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0%
True
0%
False
Explanation
True.
Owing to improvement in technology, supply of the good in the market will increase causing a rightward shift of the supply curve. Accordingly, equilibrium price will decrease.
In a situation of war when people are fearing shortage of rice, equilibrium price of rice tends to rise.
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0%
True
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False
Explanation
True.
Fearing shortage of rice, the demand curve for rice will shift towards right, causing a rise in equilibrium price.
In a state of increasing cost of production leading to a substantial cut in production, equilibrium price will fall.
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0%
True
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False
Explanation
False.
With a substantial cut in production due to increase in cost of production, the supply curve shifts to the left and equilibrium price will, thus, increase.
If population increases, supply curve remains unchanged in the context of market equilibrium.
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0%
True
0%
False
Explanation
True.
Population changes affect only the market demand, not the market supply. Market supply will be affected with changes in the factors of production.
Market price is always equal to or greater than the support price of a commodity.
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0%
True
0%
False
Explanation
True.
In a situation of support price (which is the minimum price assured to the producers), market price ought to be equal to or greater than the support price.
State whether the following statement is True or False.
If price falls, the supply curve will shift to the left.
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True
0%
False
Explanation
1:Shifting of the supply curve to the left is due to a decrease in demand which is not the result of a change in price but due to changes in the factors other than price. These factors may be changes in taxes, cost of production, etc.
2:When the price falls the there is movement along the curve not shift
Select the statement/statements, which is/ are correct about the process of issuing shares by 'private placement':
This is one among three ways in which a company raises capital in the 'primary market' through issuing shares.
Company directly negotiates to the investors, which may be financial institutions as well as individuals.
This is completely opposite to the 'public issue', in its process.
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$$1$$ and $$2$$
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$$2$$ and $$3$$
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$$1$$ and $$3$$
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$$1, 2$$ and $$3$$
Explanation
In a 'public issue', the company does not negotiate directly with the people who want to purchase the shares.
Consider the following statements and select the correct code about a 'market economy'.
$$1$$. Government facilities the private sector's choice of produced goods and services.
$$2$$. Price mechanism is usually not allowed due to welfare reasons.
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Only $$1$$
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Only $$2$$
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Both $$1$$ and $$2$$
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Neither $$1$$ nor $$2$$
Explanation
In a market economy, it is the private sector, which decides what to produce and the market forces(i.e., demand and supply) decide the prices of the goods and services.
In a perfectly competitive economy production and consumption will both be Pareto optimal, if the economy operates at a point where?
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There is general equilibrium
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Output levels are below equilibrium
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Output levels are above equilibrium
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Consumption is less than output
Explanation
General equilibrium involving both production and consumption also ensures the achievement of Pareto efficiency. Pareto efficiency in this regard requires that marginal rate of transformation should be equal to the marginal rate of substitution of the individuals.
A state of 'equilibrium' for a consumer means ___________________.
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A state of saving rate equal to the growth rate of the economy for the consumer
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A state of zero saving for the consumer and full expenditure
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The consumer is unable to fulfill needs with the given income
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The consumer is able to fulfill needs with a given level of income
Explanation
Though this ideal stage is reached only in hypothesis, with the changing time consumers not only demand new goods and services but also new times come with alternatives of it.
In the table below what will be equilibrium market price?
Price (Rs)
Demand (tonnes per annum)
Supply (tonnes per annum)
1
1,000
400
2
900
500
3
800
600
4
700
700
5
600
800
6
500
900
7
400
1,000
8
300
1,100
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Rs. 2
0%
Rs. 3
0%
Rs. 4
0%
Rs. 5
Explanation
At the equilibrium level, market demand is equal to market supply. In the above schedule at the price level of Rs. 4, market demand = market supply = 700
When a consumer moves from one point to another on the same supply curve it is called as -
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Expansion or contraction in supply
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Movement along supply curve
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Both (A) and (B)
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Increase or decrease in supply
Questions are based on the demand and supply diagrams in Figure.
In the given figure, $$D_1$$ and $$S_1$$ are the original demand and supply curves $$D_2, D_3, S_2$$ and $$S_3$$ are possible new demand and supply curves. Starting from initial equilibrium point (1) what point on the graph most likely to result from each change?
$$\rightarrow$$Suppose wage rate of coal mineral increases and price of natural gas decreases. (coal and natural gas are substitutes), what point in the figure is most likely to be the equilibrium price and quantity?
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Point 6
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Point 4
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Point 3
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Point 2
Explanation
Demand decreases because price of natural gas decreases and there is a direct relation between the price and demand of two substitute goods. Supply also decreases because cost of factors of production (wages) increases. Thus, Point 4 marks the new equilibrium point.
When demand curve shifts rightward, and supply curve leftward, _______.
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equilibrium price decreases
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equilibrium price increases
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equilibrium quantity decreases
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equilibrium quantity and price may increase, decrease or remain unchanged
Explanation
When demand curve shifts right and supply curve to the left, the equilibrium price increases but the equilibrium quantity may increase, decrease or remain same, depending on the magnitude of shift in the two curves.
According to Keynesian theory of income determination, at full employment, a fall in aggregate demand lead to a ___________.
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fall in prices of output and resources
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fall in real gross national product and employment
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rise in real gross national product and investment
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rise in prices of output and resources
Explanation
According to Keynesian theory of income determination, at full employment, a fall in aggregate demand causes a fall in prices of output and resources.
Under this model, the equilibrium level of national income is determined at a point where the aggregate demand curve intersects the aggregate supply curve.
Questions are based on the demand and supply diagrams in Figure $$D_1$$ and $$S_1$$ are the original demand and supply curves $$D_2, D_3, S_2$$ and $$S_3$$ are possible new demand and supply curves. Starting from initial co librium point (1) what point on the graph most likely to result from each change?
$$\rightarrow$$Assume that consumer income has increased. Given that Y is an inferior good, which point in Figure is most likely to be the new equilibrium price and quantity?
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Point 4.
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Point 6.
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Point 5.
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Point 8.
Explanation
Demand decreases because in case of inferior goods with the increase in income demand decreases. Supply remains constant as nothing is given about it. Thus, Point 6 marks the new equilibrium point.
When both demand and supply curve shift leftward, _____.
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equilibrium quantity decreases
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equilibrium price may increase, decrease or remain unchanged
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equilibrium quantity may increase, decrease or remain unchanged
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equilibrium price decreases
Explanation
When both the demand curve and the supply curve shift towards the left, the equilibrium quantity decreases but the equilibrium price may increase decrease or remain the same depending on the magnitude of shifts in the two curves.
Assume X is a normal good. Holding everything else constant, assume that income rises and the price of a factor of production also increases. What point in Figure is most likely to be the new equilibrium price and quantity?
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Point 9
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Point 5
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Point 3
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Point 2
Explanation
Point 2.
As there is increase in income the demand it implies that the demand will increase from D1 to D2 i.e., towards right and because the price of factors of production have increases there will be decrease in supply and it will move towards the left from S1 to S3. The point of equilibrium for cure D2 and S3 is Point 2 being the new equilibrium point.
In order to correct the situation of excess demand _____.
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Cost of credit is raised
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Borrowing from RBI is reduced
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Taxes are increased
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All of the above
Explanation
The following are measures that would correct the situation of excess demand:
1. Cost of credit is raised: When there is a situation of excess demand, the government steps up public borrowing by offering attractive rates of interest. This reduces liquidity with the people.
2. Borrowing from RBI is reduced: When borrowing is reduced, the amount of liquidity in the economy is also reduced, as desired to correct the inflationary gap in the economy.
3. Taxes are increased: By increasing the tax burden on the households, the government reduces their disposable income. Accordingly, AD is reduced or excess demand is managed.
Hence, D is the correct option.
When there is no excess demand or excess supply in the market, everybody is equally satisfied (or nobody suffers any shortage).
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True
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False
Explanation
False.
When there is no excess demand or excess supply, the market clears. However, it does not mean that everybody is equally satisfied. At the given market price, some people may not be able to buy the product, and therefore, remain unsatisfied.
The imposition of ceiling on a monopoly's price will affect his ____________.
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profits only
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average revenue in the short-run only
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equilibrium output only
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equilibrium output and profits
Explanation
The imposition of price ceiling on monopoly's price will affect his equilibrium output and price. A monopoly is a price maker and influences the market as there are no close substitutes or competitors of the monopolist. By imposing a price restriction the government is restricting the price and there by converting the monopoly market like a competitive one. Hence, the equilibrium output and price will change because of the price ceiling.
We are analyzing the market for good Z. The price of a complement good, good Y, declines. At the same time, there is a technological advance in the production of good Z. Which point in figure is most likely to be the new equilibrium price and quantity?
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Point 4
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Point 5
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Point 7
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Point 8
Explanation
Point 7.
As there is a decline in the price of the complementary goods demand will increase for good Z as well as Good Y and therefore the demand curve for good Z shifts to the right from D1 to D2. Technological advancement helps to reduce the cost of production and thereby increasing the supply of Good Z. The supply curve will shifts towards the right from S1 to S2. The new equilibrium of curves D2 and S2 is Point 7.
Questions are based on the demand and supply diagrams in Figure $$D_1$$ and $$S_1$$ are the original demand and supply curves $$D_2, D_3, S_2$$ and $$S_3$$ are possible new demand and supply curves. Starting from initial co librium point (1) what point on the graph most likely to result from each change?
$$\rightarrow$$Assume that the government has just removed the 10% excise duty on good X. What point in Figure 1 is most likely to be the new equilibrium price and quantity?
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Point 6.
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Point 4.
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Point 7.
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Point 8.
Explanation
Demand remains constant as nothing is given about it. Supply increases as the government has withdrawn the taxes. Thus, Point 8 marks the new equilibrium point.
Questions are based on the demand and supply diagrams in Figure $$D_1$$ and $$S_1$$ are the original demand and supply curves $$D_2, D_3, S_2$$ and $$S_3$$ are possible new demand and supply curves. Starting from initial co librium point (1) what point on the graph most likely to result from each change?
$$\rightarrow$$A government research agency has published outcome of studies which say that consumption of good X could cause cancer. In addition, assume that a powerful lot has persuaded the government to give subsidy to the manufacturers of good X. what point in Figure is most likely to be the new equilibrium price and quantity?
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Point 6.
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Point 5.
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Point 3.
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Point 9.
Explanation
Demand decreases as it is harmful for consumption. Supply increases as the subsidy has been provided to the manufacturers. Thus, Point 9 marks the new equilibrium point.
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