Question :
7.4 Prices Guide the Invisible Hand
1) Which of the following : 1377397
7.4 Prices Guide the Invisible Hand
1) Which of the following statements is true of market prices in a perfectly competitive market?
A) Market prices are determined by the government.
B) Market prices allow for efficient allocation of scarce resources.
C) Market prices are not stable and fluctuate widely.
D) Market prices do not act as incentives for buyers.
2) The invisible hand is mostly guided by:
A) costs of production.
B) quantity of goods and services sold.
C) market prices.
D) government intervention.
3) Without any restrictions in a perfectly competitive market, if there is a sudden outward shift in the demand for a good:
A) sellers of the good will increase the supply of the good at the same price.
B) sellers of the good will increase the quantity of the good supplied in the market.
C) sellers of the good will decrease the supply of the good at the same price.
D) sellers of the good will decrease the quantity supplied.
4) A price control is:
A) a market determined equilibrium price.
B) a non-market price imposition.
C) the price at which quantity demanded equals quantity supplied.
D) the price that maximizes social surplus.
5) If prices are held below the equilibrium price:
A) there exists a surplus in the market.
B) there exists a shortage in the market.
C) social surplus is maximized.
D) all firms earn positive economic profits.
6) If prices are held above the equilibrium price:
A) social surplus is maximized.
B) all firms incur losses.
C) there exists a surplus in the market.
D) there exists a shortage in the market.
7) With an increase in the demand for a good, if prices are not allowed to increase:
A) social surplus will be maintained at maximum.
B) there will be no incentive for firms to increase the quantity supplied of the good.
C) a surplus will occur in the market.
D) there will be an increase in overall efficiency in the market.
The following figure shows the demand and supply curves for a good. The initial demand curve is D1 is S. Later, due to an external shock, the demand curve shifts to D2.
8) Refer to the figure above. What is the initial equilibrium price of the good?
A) $20
B) $40
C) $60
D) $80
9) Refer to the figure above. What is the initial equilibrium quantity of the good?
A) 20 units
B) 30 units
C) 35 units
D) 50 units
10) Refer to the figure above. What is the equilibrium price after the demand curve shifts to D2?
A) $20
B) $40
C) $60
D) $80
11) Refer to the figure above. What is the equilibrium quantity after the demand curve shifts to D2?
A) 20 units
B) 30 units
C) 35 units
D) 50 units
12) Refer to the figure above. After the demand curve shifts to D2, if the price is held below the new equilibrium, then:
A) the quantity demanded will equal the quantity supplied.
B) the quantity demanded will be greater than the quantity supplied.
C) the quantity demanded will be lesser than the quantity supplied.
D) there will be zero deadweight loss.
