Each question of the following parts Perfectly competitive market has

Answer each question of
the following parts (100 Marks) Part 1.Choose the correct answer of the following: (40
Marks)
1-
Perfectly competitive market
has
A-
Only one seller
B-
At least a few sellers
C-
Many buyers and sellers
D-
Firms that set their own prices
2-
If an increase in the price of
blue jeans leads to an increase in the demand for tennis shoes, then blue jeans
and tennis shoes are:
A-
Complements
B-
Normal goods
C-
Inferior goods
D-
Substitutes
3-
The law of demand states that
an increase in the price of a good
A-
Decreases the demand for the
good
B-
Decreases the quantity demanded
for that good
C-
Increases the supply of the
good
D-
Increases the quantity supplied
of that good
4-
The law of supply states that
an increase in the price of a good
A-
Decreases the demand for the
good
B-
Decreases the quantity demanded
for that good
C-
Increases the supply of the
good
D-
Increases the quantity supplied
of the good
5-
If an increase in consumer
incomes leads to a decrease in the demand for camping equipment, then camping
equipment is:
A- A complementary good
B- An inferior good
C- A substitute good
D- A normal good
6-
Which of the following shifts
the demand for watches to the right?
A. A decrease in the price of watches
B. A decrease in consumer incomes if watches are a normal good
C. A decrease in the price of watch batteries if watch batteries and
watches are complements
D. An increase in the price of watches
7-
All of the following shift the
supply of watches to the right except
A-
An increase in the price of
watches
B-
An advance in the technology
used to manufacture watches
C-
A decrease in the wage of
workers employed to manufacture watches
D-
Manufactures’ expectations of
lower watch prices in the future
8-
If the price of a good is above
the equilibrium price,
A- There is a surplus and the price will rise
B- There is a surplus and the price will fall
C- There is a shortage and the price will rise
D- There is a shortage and the price will fall
9- If the price of a good is below the equilibrium price,
A- There is a shortage and the price will rise
B- There is a surplus and the price will rise
C- There is a surplus and the price will fall
D- There is a shortage and the price will fall
10- If the price of a good is equal to the equilibrium price,
A- There is a surplus and the price will rise
B- There is a surplus and the price will fall
C- There is a shortage and the price will rise
D- The quantity demanded is equal to the quantity supplied and the
price remains unchanged
11- An increase (rightward shift) in the demand for a good will tend to
cause
A- An increase in the equilibrium price and quantity
B- A decrease in the equilibrium price and quantity
C- An increase in the equilibrium price and a decrease in the
equilibrium quantity
D- A decrease in the equilibrium price and an increase in the
equilibrium quantity
12- An inferior good is one for which an increase in income causes a(n)
A- Increase in supply
B- Decrease in supply
C- Increase in demand
D- Decrease in demand
13- If a small percentage increase in the price of a good greatly
reduces the quantity demanded for that good, the demand for the good is
A- Price inelastic
B- Price elastic
C- Unit price elastic
D- Income inelastic
14- The price elasticity of demand is defined as
A- The percentage change in price of a good divided by the percentage
change in the quantity demanded of that good
B- The percentage change in income divided by the percentage change in
the quantity demanded
C- The percentage change in the quantity demanded of a good divided by
the percentage changein the price of that good
D- The percentage change in the quantity demanded divided by the percentage
change in income
15- If the income elasticity of demand for a good is negative, it must
be
A- An inferior good
B- A luxury good
C- A normal good
D- An elastic good
16- If consumers think that there are very few substitutes for a good,
then
A- Supply would tend to be price elastic
B- Supply would tend to be price inelastic
C- Demand would tend to be price elastic
D- Demand would tend to be price inelastic

17- If the demand for a given product is inelastic, a 3 percent increase
in the price will
A-
Decrease the quantity demanded by
more than 3 percent
B-
Decrease the quantity demanded
by less than 3 percent
C- Increase the quantity demanded by more than 3 percent
D-
Increase the quantity demanded by less than 3 percent
18- A decrease (leftward shift) in the supply for a good will tend to
cause
A-
An increase in the equilibrium
price and a decrease in the equilibrium quantity
B-
An increase in the equilibrium
price and quantity
C-
A decrease in the equilibrium
price and quantity
D-
A decrease in the equilibrium
price and an increase in the equilibrium quantity
19- Which of the following would cause a demand curve for a good to be
price inelastic?
A- There are a great number of substitutes for the good
B- The good is inferior
C- The good is a luxury
D- The good is necessity
20-Suppose there is an increase in both the supply and demand for
personal computers. In the market for
personal computers, we would expect the
A- Equilibrium quantity to rise and the equilibrium price to rise
B- Equilibrium quantity to rise and the change in the equilibrium price
to be ambiguous
C-
Equilibrium quantity to rise
and the equilibrium price to fall
D- Equilibrium quantity to rise and the equilibrium price to remain
constant
Part 2.Suppose that you
have been hired as an economic consultant by OPEC and given the following
schedule showing the world demand and supply for oil: (60 Marks)

Price ($/barrel)

Quantity Demanded
(millions of barrels/day)

Quantity Supplied (millions of barrels/day)

10

60

20

20

50

30

30

40

40

40

30

50

50

20

60

Your
advice is needed on the following questions (use the diagram):
1-
What is the price, quantity of
supply and quantity of demand in equilibrium situation?
2-
If the price raises from $20 to
$30 a barrel, will the total revenue from oil sales increase or decrease?
3-
What are the values of the
price elasticity of booth demand and supply for price changes from $20 to $30 a
barrel?
4-
If the price of oil degrease
from equilibrium price $30 to new price $20 then:

What do we call the gap between
the quantity demanded and quantity supplied?

What is its value?

What is your advice to return
to the equilibrium situation?
Good Luck

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