Free Market Equilibrium 01 Practice Test - 11th Grade - Commerce
Question 1
In which of the following economies is central control more?
Communism
Capitalism
Mixed economy
None of these
SOLUTION
Solution : A
Commuism is an examlple of a centrally planned economy.
Question 2
At which of the following points is the quantity demanded and quantity supplied equal?
Shutdown point
Break-even point
Equilibrium point
Profit-maximization point
SOLUTION
Solution : C
At equilibrium, quantity demanded is equal to the quantity supplied.
Question 3
Which of the following are examples of price controls?
Minimum wage
Rent control
Minimum support price
All of these
SOLUTION
Solution : D
Price control includes artificial floors and ceilings on the price.
Question 4
At equilibrium, which of the following are true?
buyers' willingness to pay is equal to sellers' willingness to accept
quantity demanded is equal to the quantity supplied
there is no shortage or surplus
all of these
SOLUTION
Solution : D
At equilibrium, buyers' willingness to pay is equal to sellers' willingness to accept. The quantity demanded is equal to the quantity supplied. Hence there is no excess demand or supply.
Question 5
In the long-run, when there is free entry and exit, the equilibrium price will be equal to the break-even price.
True
False
SOLUTION
Solution : A
In the long-run, when there is free entry and exit, the market price always tend to approach the break-even price and is constant. This means a horizontal supply. Hence, the equilibrium price would be equal to the shut-down price.
Question 6
Which of the following taxes is an example of Pigouvian tax?
tax on petrol
income tax
tax on cigarettes
tax on medicines
SOLUTION
Solution : C
Pigouvian taxes are used to decrease supply to socially optimal levels. In this case, decreasing the supply of cigarettes leads to a socially optimum outcome.
Question 7
A decrease in demand causes the equilibrium price to:
Rise
Fall
Remain constant
Indeterminate
SOLUTION
Solution : B
A decrease in demand causes the equilibrium price to fall.
Question 8
When price is below equilibrium level, there will be:
Surplus commodity in the market
Shortage of commodity in the market
Supply curve will shift
Demand curve will shift
SOLUTION
Solution : B
When price is below equilibrium level, there will be a shortage of commodity in the market.
Question 9
If equilibrium price rises but equilibrium quantity remains unchanged, the cause is:
Supply and demand both increase equally
Supply and demand both decrease equally
Supply decreases and demand increases
Supply increases and demand decreases
SOLUTION
Solution : C
If equilibrium price rises but equilibrium quantity remains unchanged, the cause is that the supply decreases and demand increases.
Question 10
Price of a product is determined in a free market:
By demand for the product
By supply of the product
By both demand and supply
By the government
SOLUTION
Solution : C
Price of a product is determined in a free market by both demand and supply.