# Free Market Equilibrium 03 Practice Test - 11th Grade - Commerce

At a price of INR 444.95, a pulp fiction novel is expected to sell 9,000 copies. If the novel is offered for sale at a price of INR 333.95, then the publisher can expect to sell

A.

less than 9,000 copies

B.

9,000 copies

C.

more than 9,000 copies

D.

It is impossible to predict the effect of a lower price on sales

#### SOLUTION

Solution : C

When the price falls, demand rises.

If automobile manufacturers are producing cars faster than people want to buy them,

A.

there is an excess supply and price can be expected to decrease

B.

there is an excess supply and price can be expected to increase

C.

there is an excess demand and price can be expected to decrease

D.

there is an excess demand and price can be expected to increase

#### SOLUTION

Solution : A

If automobile manufacturers are producing cars faster than people want to buy them, there is an excess supply and price can be expected to decrease.

If a rise in supply exceeds a rise in demand, then we should expect

A.

the equilibrium price and quantity levels will rise.

B.

the equilibrium price will rise while the equilibrium quantity will decline.

C.

the equilibrium price will fall while the equilibrium quantity will rise

D.

the equilibrium price and quantity levels will decline

#### SOLUTION

Solution : C

The equilibrium price will fall while the equilibrium quantity will rise.

When the wage rate increases, the quantity of labour supplied decreases.

A.

True

B.

False

#### SOLUTION

Solution : A

Supply of labour also follows the law of supply. Wage rate is the price of labour. As wage rate increases, the quantity of labour supplied decreases.

Which of the following will help a country become an exporter of a product (assume that the product is a normal good given the median consumer income)?

A.

An increase in incomes of domestic consumers

B.

C.

An increased productivity of domestic labor

D.

An increased cost of domestic labor

#### SOLUTION

Solution : C

An increased productivity of domestic labor will leads to increase in supply of the product.

If production, allocation, and ownership are 100% controlled by government, then we call such an economic system as Socialism.

A.

True

B.

False

#### SOLUTION

Solution : B

False. If production, allocation, and ownership are 100% controlled by government, then we call such an economic system as Communism.

When Ownership, Production, and Allocation are mostly controlled in an economy, such a system of organizing the economy is called Communism.

A.

True

B.

False

#### SOLUTION

Solution : B

False. When Ownership, Production, and Allocation are mostly controlled in an economy, such a system of organizing the economy is called Socialism.

When both demand and supply decrease, the equilibrium quantity falls but the change in equilibrium price is ambiguous.

A.

True

B.

False

#### SOLUTION

Solution : A

True. When both demand and supply decrease, the equilibrium quantity falls but the change in equilibrium price is ambiguous.

A.

True

B.

False

#### SOLUTION

Solution : A

Economic efficiency, or efficiency, occurs when all goods and services in the economy are produced and consumed at their respective socially optimal levels.

A.

True

B.

False

#### SOLUTION

Solution : A

True. Economic efficiency, or efficiency, occurs when all goods and services in the economy are produced and consumed at their respective socially optimal levels.