If a seller in a competitive market chooses to charge more than the going price. then


If a seller in a competitive market chooses to charge more than the going price, then A other sellers would also raise their
Figure 4-21 price 20 s 18 16 14 12 10 8 6 4 2 D 1 23s 6 quantity Refer to Figure 4-21. At a price of $16, there is a A. surpl
Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 12 in the long run. If an increase in the

Answer

Ans: B) Buyers will make purchases from other sellers. Explanation: Under perfect competition , the industry is the price maker whereas the firm is the price taker. It means there is an unique price in the market . Firms are not able to change the market price. They can sell or produce as much as they can at the prevailing market price. Ans: B) an increase in supply Explanation: A rightward shift in the supply curve shows an increase in supply whereas a leftward shift in the supply curve shows a decrease in supply. Ans: A) surplus of 3 units Explanation: At price of $16; Quantity demanded ( Qd) = 1 units Quantity supplied ( Qs) = 4 units When Qs > Qd , then there will be surplus in the market. Surplus amount = 4 units – 1 units = 3 units. Ans: A ) 6% in the short-run and 24% in the long-run Explanation: Elasticity of supply = % change in quantity supplied / % change in price In the short-run; 0.3 = % change in quantity supplied / 20% or 0.20 % change in quantity supplied = 0.20 * 0.3 =0.06 or 6 % In the long-run; 1.2 = % change in quantity supplied / 20% or 0.20 % change in quantity supplied = 0.20 * 1.2 =0.24 or 24 % Ans: D) All the above are correct. Explanation:

When a price ceiling lies below the equilibrium point , then that price ceiling is called binding.

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