The Price Mechanism Quiz

What is the equilibrium price?

• The price at which demand is greater than supply

• The price at which supply is greater than demand

• The price at which there is no demand or supply

• The price at which quantity demanded equals quantity supplied.

Which of these is NOT a characteristic of equilibrium?

• Where Supply and Demand Intersect.
• Where there is little surplus or shortage.
• Where QD = QS.
• Where all markets strive to be.

Price Mechanism has three functions

• Ratios, signalling, providing incentives

• Rationing, signalling and providing incentives

• Rationing, signs and providing incentives

• Rationing, signalling and providing services

Define consumer surplus.

• The amount of money consumers receive from selling a good or service

• The difference between what consumers are willing to pay for a good or service and what they actually have to pay.

• The difference between what producers are willing to sell a good or service for and what they actually receive

• The total amount of money consumers spend on a good or service

Explain producer surplus.

• Producer surplus is the difference between the cost of production and the price a consumer is willing to pay for a good or service.

• Producer surplus is the total revenue earned by a producer from selling a good or service.

• Producer surplus is the difference between the price a producer is willing to accept for a good or service and the actual price they receive.

• Producer surplus is the extra profit earned by a producer when the price of a good increases.

What happens to consumer surplus when the price of a good decreases?

• Remains the same

• Becomes negative

• Increases

• Fluctuates randomly

How does a surplus or shortage affect the market price?

• Surplus leads to an increase in market price, shortage leads to a decrease in market price

• Surplus leads to a decrease in market price, shortage leads to an increase in market price

• Surplus leads to an increase in market price, shortage has no effect on market price

• Surplus has no effect on market price, shortage leads to a decrease in market price

What factors can cause a shift in the demand curve?

• Changes in the weather

• Changes in income, price of related goods, consumer preferences, and expectations

• Government regulations

• Number of producers in the market

What is the relationship between price and quantity supplied?

• Direct or positive

• Random

• Inverse or negative

• No relationship

How does the price mechanism allocate resources in a market economy?

• By allowing consumers to set the prices

• By randomly assigning prices to goods and services

• By adjusting prices based on supply and demand

• By government intervention and control