SEMESTER MARCH – JULY 2023

EXERCISES / TUTORIALS

COURSE NAME : PRINCIPLES OF ECONOMICS

COURSE CODE : ECO120
PROGRAM : AM110, HM111
GROUP : AM1103R, HM1114B

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 TOPIC : MARKET EQUILIBRIUM AND GOVERNMENT INTERVENTION

PART A: MULTIPLE CHOICE QUESTIONS

Choose the correct answer.

1. Equilibrium refers to a state of

A. discomfort.
B. rest.
C. supply.
D. none of the above.

2. Which of the following best describes a market in equilibrium?

A. At the current quantity, the price sellers charge is more than what buyers are willing
to pay.
B. At the current price, quantity supplied is less than quantity demanded.
C. At the current price, quantity supplied is more than quantity demanded.
D. At the current price, quantity supplied is equal quantity demanded.

3. When the quantity demanded is not equal to the quantity supplied, we say the market is
_______.

A. collapsing
B. in stable equilibrium
C. in equilibrium
D. in disequilibrium

4. The amount by which the quantity demanded exceeds quantity supplied is referred to as

A. excess consumer demand.

B. excess supply.
C excess demand.
D. equilibrium.

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Questions 5 – 7 refer to Figure 3-1.

5. If the price is $25,

A. there would be a surplus of 300 units.

B. there would be a shortage of 300 units.
C. there would be a surplus of 200 units.
D. there would be a shortage of 200 units.

6. At a price of $25, how many units will be sold?

A. 400
B. 500
C. 600
D. 800

7. If the current market price is $25, the market will achieve equilibrium by

A. a price increase, increasing the supply and decreasing the demand.

B. a price decrease, decreasing the supply and increasing the demand.
C. a price decrease, decreasing the quantity supplied and increasing the quantity
demanded.
D. a price increase, increasing the quantity supplied and decreasing the quantity
demanded.

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8. If supply remains constant, a leftward shift in demand curve will lead to

A. fall in equilibrium price and quantity bought.

B. rise in equilibrium price and quantity bought.
C. fall in equilibrium price but increase in demand.
D. fall in demand but increase in price of good.

9. With demand being constant, an increase in supply of the commodity causes

A. decrease in equilibrium price and quantity.

B. increase in equilibrium price and quantity.
C. decrease in equilibrium price and increase in the equilibrium quantity.
D. increase in the equilibrium price and decrease in the equilibrium quantity.

10. When demand and supply increase in the same proportion,

A. price increases.
B. price is same.
C. price decreases.
D. no constant value of price.

11. Which of the following would cause the equilibrium price of ketchup to increase and the
equilibrium quantity of ketchup to decrease?

A. A decrease in the price of tomatoes.

B. An increase in the price of tomatoes.
C. An increase in the price of mustard, a substitute for ketchup.
D. An increase in the price of french fries, a complement for ketchup.

12. A decrease in the demand for eggs due to changes in consumer tastes, accompanied by
a decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in

A. a decrease in the equilibrium quantity of eggs and no change in the equilibrium

price.
B. a decrease in the equilibrium price of eggs and no change in the equilibrium
quantity.
C. a decrease in the equilibrium price of egg; the equilibrium quantity may increase
or decrease.
D. a decrease in the equilibrium quantity of eggs; the equilibrium price may increase
or decrease.

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13. Maximum Price Legislation is also known as

A. Price Ceiling.
B. Marginal Revenue Product (MRP).
C. Price Floor.
D. Price Control.

14. Which of these is true about Price Ceiling?

A. There is no rationing.
B. Price ceiling is set below equilibrium price.
C. Price ceiling is used for goods like Gold, Luxury Cars.
D. It mainly benefits higher income groups.

15. Price ceiling is usually more favorable for

A. Rich people.
B. Upper middle-class groups.
C. Low-income groups.
D. Both A and C.

16. _______ is a system of distribution of a specified quantity of a product at price fixed by

the government.

A. Black Market
B. Allocation by Seller’s Preference
C. Rationing
D. First come, first serve

17. Fixing minimum price causes

A. surplus.
B. shortage.
C. equilibrium.
D. None of the above.

END OF QUESTION

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