Question 1

If a firm is a price- taker it

Accepted Answer

A firm that is a price-taker has no ability to influence the market price. This is typically because the firm is one of many in a competitive market, and its output is too small relative to the total market to affect the price.

Question 2

Economists use the term 'perfect competition' for a situation where

Accepted Answer

In a perfect competition market structure, both producers and consumers are price-takers, meaning they accept the market price as given and cannot influence it through their own actions. This occurs because there are many buyers and sellers, and no single participant has enough power to dictate the price of goods or services.

Question 3

In a perfectly competitive market

Accepted Answer

In a perfectly competitive market, there are many buyers and sellers, none of whom can influence the market price. This means all participants are price-takers, accepting the market price as given.

Question 4

A free market is a market with

Accepted Answer

A free market is characterized by the absence of government intervention, allowing the forces of supply and demand to determine prices and the allocation of resources.

Question 5

If a market is trading at an equilibrium price

Accepted Answer

At equilibrium price, the quantity demanded equals the quantity supplied, which means there is no surplus or shortage of the good or service.

Question 6

Assume that there is a rise in the demand for a good. Ceteris paribus, this will result in

Accepted Answer

A rise in demand will lead to a rise in the price of the good, and a rise in the demand for the factors used to make it, which will lead to a rise in their prices.

Question 7

The position at which a demand curve and supply curve cross defines the _________price and equilibrium _________.

Accepted Answer

The point where the demand curve and supply curve intersect defines the equilibrium price and equilibrium quantity, indicating the price at which the quantity demanded equals the quantity supplied.

Question 8

The law of demand states that, other things being equal, a decrease in the price of a good will result in

Accepted Answer

The law of demand indicates that, ceteris paribus, when the price of a good decreases, consumers are willing to purchase more of it, hence there is an increase in the quantity demanded.

Question 9

Which of the following is held constant along a demand curve?

Accepted Answer

All of the above factors (the price of substitute goods, household income, tastes, and preferences) are held constant along a demand curve to isolate the effect of changes in the price of the good itself on the quantity demanded.

Question 10

The quantity demanded of Pepsi^TMhas decreased. This is most likely to be because

Accepted Answer

When the price of a product goes up, the quantity demanded typically decreases, according to the law of demand.

Question 11

Consider the market for red jeans. If celebrities start to wear more and more red jeans, what will happen to the equilibrium price and quantity of them?

Accepted Answer

When celebrities start wearing more red jeans, it increases the demand for red jeans among consumers. This higher demand shifts the demand curve to the right, leading to a higher equilibrium price and quantity.

Question 12

Which of the following is not a determinant of demand?

Accepted Answer

The profitability of other products is not a determinant of demand for a specific product. Determinants of demand typically include factors like tastes, the price of substitute goods, income, and the distribution of income, which directly affect consumers' willingness and ability to purchase a product. The profitability of other products is more related to the supply side or investment decisions rather than consumer demand.

Question 13

The following diagram shows the demand curve for a product shifting from D₀to D₁. Which of the following could have caused this shift?

Accepted Answer

The answer of The following diagram shows the demand curve...

Question 14

Which of the following might shift the demand curve for cinema tickets to the right?

Accepted Answer

An increase in income generally increases the demand for normal goods, such as cinema tickets, shifting the demand curve to the right.

Question 15

If a computer games addict became unemployed and decided not to buy as many computer games, economists would say that they were treating computer games as

Accepted Answer

Computer games are considered a normal good because the individual's consumption decreases as their income decreases, which is typical behavior for normal goods. When people have less money (such as when they become unemployed), they tend to buy less of normal goods.

Question 16

Which one of the following would shift the demand curve for a commodity to the right?

Accepted Answer

The demand curve for a commodity shifts to the right when the demand for that commodity increases. This can happen for various reasons, including an increase in consumer preference, an increase in consumer income, or a rise in the price of a substitute good. Among the options provided, only the rise in the price of a substitute good (D) would lead to an increase in demand for the original commodity, as consumers would start looking for cheaper alternatives, thus shifting the demand curve to the right.

Question 17

Which of the following might shift the demand curve for butter to the right?

Accepted Answer

An increase in income can lead to a rightward shift in the demand curve for normal goods like butter, as people have more purchasing power and may buy more butter.

Question 18

Consider the market for good Z. What will be the effect of an increase in income?

Accepted Answer

The answer of Consider the market for good Z. What...

Question 19

Expectations about price changes will affect

Accepted Answer

Expectations about price changes can affect both the demand and supply curves. If consumers expect prices to rise in the future, they may increase their demand now, shifting the demand curve. Similarly, if suppliers expect prices to rise, they may hold off on supplying now to sell more in the future at higher prices, shifting the supply curve.

Question 20

An increase in supply, not caused by a change in market price, is represented by

Accepted Answer

A rightward shift of the supply curve represents an increase in supply not caused by a change in market price, indicating that producers are willing to supply more at each price level.

Quiz 4: The Working of Competitive Markets

If a firm is a price- taker it

Economists use the term 'perfect competition' for a situation where

In a perfectly competitive market

A free market is a market with

If a market is trading at an equilibrium price

Assume that there is a rise in the demand for a good. Ceteris paribus, this will result in

The position at which a demand curve and supply curve cross defines the _price and equilibrium _.

The law of demand states that, other things being equal, a decrease in the price of a good will result in

Which of the following is held constant along a demand curve?

The quantity demanded of Pepsi^TMhas decreased. This is most likely to be because

Consider the market for red jeans. If celebrities start to wear more and more red jeans, what will happen to the equilibrium price and quantity of them?

Which of the following is not a determinant of demand?

The following diagram shows the demand curve for a product shifting from D₀to D₁. Which of the following could have caused this shift?

Which of the following might shift the demand curve for cinema tickets to the right?

If a computer games addict became unemployed and decided not to buy as many computer games, economists would say that they were treating computer games as

Which one of the following would shift the demand curve for a commodity to the right?

Which of the following might shift the demand curve for butter to the right?

Consider the market for good Z. What will be the effect of an increase in income?

Expectations about price changes will affect

An increase in supply, not caused by a change in market price, is represented by

Quiz 4: The Working of Competitive Markets

If a firm is a price- taker it

Economists use the term 'perfect competition' for a situation where

In a perfectly competitive market

A free market is a market with

If a market is trading at an equilibrium price

Assume that there is a rise in the demand for a good. Ceteris paribus, this will result in

The position at which a demand curve and supply curve cross defines the _________price and equilibrium _________.

The law of demand states that, other things being equal, a decrease in the price of a good will result in

Which of the following is held constant along a demand curve?

The quantity demanded of PepsiTM has decreased. This is most likely to be because

Consider the market for red jeans. If celebrities start to wear more and more red jeans, what will happen to the equilibrium price and quantity of them?

Which of the following is not a determinant of demand?

The following diagram shows the demand curve for a product shifting from D0 to D1. Which of the following could have caused this shift?

Which of the following might shift the demand curve for cinema tickets to the right?

If a computer games addict became unemployed and decided not to buy as many computer games, economists would say that they were treating computer games as

Which one of the following would shift the demand curve for a commodity to the right?

Which of the following might shift the demand curve for butter to the right?

Consider the market for good Z. What will be the effect of an increase in income?

Expectations about price changes will affect

An increase in supply, not caused by a change in market price, is represented by

The position at which a demand curve and supply curve cross defines the _price and equilibrium _.

The quantity demanded of Pepsi^TMhas decreased. This is most likely to be because

The following diagram shows the demand curve for a product shifting from D₀to D₁. Which of the following could have caused this shift?