MULTIPLE CHOICE QUESTIONS
TESTBANK – CHAPTER 4
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Answer the following questions by selecting the appropriate answer from the list
below.
Question 1
Demand is the quantity of goods:
A. desired by consumers.
B. ordered by consumers in a particular period.
C. consumers are willing and able to buy at particular prices in a certain
period.
D. that consumers require in order to survive.
Question 2
Which one of the following statements is false?
A. Motor vehicles and petrol are complements.
B. Credit cards and cash are substitutes.
C. Honey and jam are complements.
D. A house and furniture are complements.
E. Butter and margarine are substitutes.
Question 3
Consumer surplus indicates that:
A. more will be demanded at lower than at higher prices.
B. it is impossible to increase consumer wellbeing by changing the way in
which income is spent.
C. consumers often get more value from a good than is represented by the
price.
D. the allocation of resources is decided by the interaction of buyers and
sellers.
E. market equilibrium can always be attained.
Question 4
Which one of the following may result in a decrease in the demand for frozen
vegetables?
A. A rise in consumers’ incomes.
B. An increase in the price of frozen vegetables.
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C. A decrease in the price of freezers.
D. A decrease in the price of fresh vegetables.
E. A decrease in the price of frozen vegetables.
Question 5
How can the impact of an increase in the price of petrol on the demand curve for
petrol be illustrated?
A. The demand curve for petrol will shift to the left.
B. The demand curve for petrol will shift to the right.
C. The demand curve for petrol will remain unchanged.
D. The demand curve will become more elastic.
E. The demand curve will become more inelastic.
Question 6
An increase in supply:
A. indicates that more is supplied at higher prices.
B. indicates that more is supplied at lower prices.
C. indicates that more is supplied at all prices.
D. is illustrated by an upward shift of the supply curve.
E. is illustrated by a leftward shift of the supply curve.
Question 7
Which one of the following will result in a decline in the demand for oil
(illustrated by a leftward shift of the demand curve):
A. a rise in oil prices.
B. a decrease in oil prices.
C. a recession in the USA and Europe.
D. the discovery of new oil deposits in the Seychelles.
E. increased sales of motor vehicles.
Question 8
Which one of the following statements is correct?
A. A rise in the price of a good will cause the supply curve of that good to
shift to the right (ie the supply of the good will increase).
B. A fall in the price of a good will result in a rightward shift of the demand
curve, ceteris paribus (ie the demand for the product will increase).
C. The quantity demanded of a good depends on the availability of the
good.
D. Demand is a synonym for wants. In other words, if a consumer demands
a good it simply means that he or she wants the good.
E. A decrease in the prices of the factors of production used to produce a
certain product will give rise to an increase in the supply of the product
(illustrated by a rightward shift of the supply curve).
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Question 9
Which of the following will not cause a change in the demand for coffee
(illustrated by a shift of the demand curve)?
A. A decrease in the price of milk, a complement.
B. An increase in the price of coffee.
C. An increase in the price of tea, a substitute.
D. An increase in the number of people drinking coffee.
E. An increase in the income of households.
Question 10
When an individual’s income rises, ceteris paribus, his/her demand for half a loaf
of bread, an inferior good:
A. rises.
B. falls.
C. remains unchanged.
D. becomes more positive.
E. can be affected in different ways – we need additional information to
provide an answer.
Question 11
If the price of domestic airline tickets increases, then, ceteris paribus:
A. the demand for domestic air travel will increase.
B. the demand for car rentals, a complement in consumption, will increase.
C. the demand for domestic air travel will decrease.
D. the demand for car rentals, a complement in consumption, will decrease.
E. the demand for car rentals, a substitute in consumption, will decrease.
Question 12
In the market for public transport, which of the following variables would
decrease demand, ceteris paribus?
A. An increase in the price of private motor vehicles.
B. A decrease in the price of private motor vehicles.
C. An increase in price of private motor vehicle service plans.
D. A decrease in the price of bus tyres.
E. An increase in the price of motorbikes, a substitute.
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Question 13
If there is an increase in the price of red meat, a substitute in production for milk,
then:
A. the supply of milk will increase.
B. the demand for milk will decrease.
C. the supply of milk will decrease.
D. there will be a movement along the supply curve for milk.
E. none of the above will result.
Question 14
A decrease in the cost of petrol used to transport LED television sets from a
harbour to Gauteng, is most likely to:
A. decrease the demand for LED television sets in Gauteng.
B. increase the supply of LED television sets in Gauteng.
C. decrease the equilibrium quantity of LED television sets traded in
Gauteng.
D. decrease the quantity of LED television sets demanded in Mpumalanga.
E. decrease the supply of LED television sets in Gauteng.
Question 15
As the price of fresh grapes (a substitute in production for wine) decreases,
ceteris paribus:
A. the supply of wine will decrease.
B. the supply of wine will increase.
C. the demand for wine will decrease.
D. the demand for wine will increase.
E. the supply of wine will be unaffected.
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Question 16
The diagram below shows the market for hamburgers.
If the price of hamburgers is fixed at R35 per burger, then:
A. there will be a surplus of 80 hamburgers.
B. there will be a shortage of 50 hamburgers.
C. the quantity of hamburgers supplied will fall to zero.
D. there will be a shortage of 80 hamburgers.
E. there will be a surplus of 50 hamburgers.
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Question 17
The diagram below shows the market for Gautrain rides. Use this diagram to
answer the questions below.
Question (a)
If the price of Gautrain rides is currently R60 per ride, then:
A. there will be a surplus of 30.
B. there will be a shortage of 50.
C. there will be a surplus of 50.
D. there will be a shortage of 30.
E. the quantity demanded will decrease to 120.
Question (b)
What is likely to happen in the market for Gautrain rides (assuming there is no
intervention by government)?
A. There is likely to be an increase in the price of Gautrain rides.
B. There is likely to be an increase in the quantity of Gautrain rides supplied
as the price decreases.
C. There is likely to be a decrease in the quantity of Gautrain rides
demanded as the price rises.
D. There is likely to be a decrease in the quantity of Gautrain rides supplied
as the price decreases.
E. The market is likely to stay as it is.
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Question 18
If milk is a normal good, then a decrease in consumers’ income will definitely
cause
A. a decrease in the demand for milk.
B. an increase in the demand for milk.
C. an increase in the supply of milk.
D. a decrease in the supply of milk.
E. an increase in the demand and supply of milk.
Question 19
If there is a successful advertising campaign promoting the health benefits of
drinking milk, then, ceteris paribus
A. the demand for milk will increase.
B. the demand for milk will decrease.
C. the supply of milk will increase.
D. the supply of milk will decrease.
E. the demand and supply of milk will increase.
Question 20
In the market for cream, which of the following events would increase demand,
ceteris paribus?
A. Increased health fears regarding the consumption of too much fat (cream
contains fat)
B. A fall in the income of consumers.
C. An increase in the price of scones, a complement.
D. A drop in the price of yoghurt, a substitute.
E. A decrease in the price of waffles, a complement.
Question 21
In the market for air travel, which of the following variables would decrease
demand, ceteris paribus?
A. An increase in rental rates for hired cars, a substitute.
B. A rise in income of tourists.
C. A rise in the price of air travel.
D. A rise in the price of hotel accommodation, a complement.
E. A drop in the price of air travel.
Question 22
Which of the following is true with regard to a decrease in the demand for
cheese, ceteris paribus?
A. It is represented by a rightward shift of the demand curve.
B. It is represented by a movement upward along the demand curve.
C. It is represented by a movement downward along the demand curve.
D. It is most likely caused by an increase in the price of the good.
E. It is represented by a leftward shift of the demand curve.
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Question 23
In the market for bicycles, which of the following variables would decrease
demand, ceteris paribus?
A. An increase in the price of bicycles.
B. A decrease in the price of bicycles.
C. A fall in the income of consumers.
D. A decrease in the price of bicycle pumps, a complement.
E. An increase in the price of motorbikes, a substitute.
Question 24
If there is an increase in the price of DVDs, a substitute in production for CDs,
then
A. the supply of CDs will increase.
B. the demand for CDs will fall.
C. the supply of CDs will decrease.
D. there will be a movement along the supply curve for CDs.
E. none of the above will result.
Question 25
A decrease in the cost of flour used to bake bread, is most like to
A. decrease the demand for bread.
B. increase the supply of bread.
C. decrease the equilibrium quantity of bread traded.
D. decrease the quantity of bread demanded.
E. decrease the supply of bread.
Question 26
A rise in the price of butter, an input into the manufacture of shortbread biscuits,
is likely to
A. increase the demand for shortbread biscuits.
B. put downward pressure on the price of shortbread biscuits.
C. increase the quantity of shortbread biscuits demanded.
D. increase the supply of shortbread biscuits.
E. put upward pressure on the price of shortbread biscuits.
Question 27
If there is a relative rise in the price of broccoli, a substitute in agricultural
production for beans, then
A. the supply curve for broccoli will shift to the left.
B. the supply of beans will increase.
C. the demand for broccoli will increase.
D. the supply curve for beans will shift to the left.
E. there will be no effect on the production of beans.
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Question 28
If there is a technological breakthrough in the beer manufacturing process then,
ceteris paribus
A. the supply of beer will increase.
B. the supply of beer will decrease.
C. the demand for beer will increase.
D. the demand for beer will decrease.
E. there will be no effect on the supply or demand of beer.
Question 29
If the equation for a market demand curve is Q d = 100 – 0,5P and the equation
for a market supply curve is Qs = –20 + P, the market equilibrium price and
quantity are:
A. P = 0,5; Q = -20
B. P = 60; Q = 80
C. P = 0,5; Q = 80
D. P = 80; Q = 60
E. P = 60; Q = 100
Question 30
If the equation for the demand curve is Q = 45 – 2P and the equation for the
supply curve is Q = –21 + 4P, then the equilibrium values for price and quantity
are:
A. P = 23 and Q = 11.
B. P = 11 and Q = 23.
C. P = 11 and Q = 45.
D. P = -21 and Q = 23.
E. P = 12 and Q = 15.
Question 31
If the equation for a market demand curve is Q d = 15 – 0,2P and the equation for
a market supply curve is Qs = ̶ 1 + 0,6P, the market equilibrium price and
quantity are
A. P = 25; Q = 10.
B. P = 20; Q = 11.
C. P = 15; Q = 12.
D. P = 10; Q = 13.
E. P = 5; Q = 14.
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Question 32
If the equation for the demand curve is Q = 450 – 25P and the equation for the
supply curve is Q =
-175 + 37,5P, then the equilibrium values for price and quantity are
A. P = 4,4 and Q = 340.
B. P = 5 and Q = 325.
C. P = 10 and Q = 200.
D. P = 11 and Q = 175.
E. P = 12 and Q = 150.
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Question 33
Which of the following will not increase the demand for bicycles in Polokwane?
A. A regulation banning motorised vehicles from the city centre.
B. A substantial rise in the price of motorcycles and cars.
C. A boycott of Polokwane by taxi operators.
D. A fall in the price of bicycles.
Question 34
Which of the following variables are not held fixed when drawing a market
demand curve?
A. Prices of substitute goods.
B. Consumer incomes.
C. Consumer tastes.
D. Quantity of the good demanded.
Question 35
Which of the following variables are not held fixed when drawing a market
supply curve?
A. Price of the good.
B. Technology
C. Number of sellers
D. Prices of inputs
Question 36
Which of the following will not affect a firm’s supply decision?
A. The price of the good.
B. The state of technology.
C. The prices of joint products.
D. The wealth of consumers.
Question 37
Butter is a substitute for margarine and bread is a complement of both. If the
price of margarine falls, one can expect that
A. the demand for butter will increase and the quantity of bread
demanded will increase.
B. the demand for butter will decrease and the demand for bread will
increase.
C. the quantity of butter demanded will decrease and the demand for
bread will increase.
D. the quantity of butter demanded will decrease and the quantity of
bread demanded will increase.
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Question 38
Which one of the following statements is correct?
A. “Demand” and “claim” have the same meaning.
B. To demand a good requires only a desire to possess the good.
C. Demand relates to plans, not to events that have occurred already.
D. “Demand” and “need” have the same meaning.
E. Demand refers to the quantities that consumers bought recently.
Question 39
Which one of the following statements is incorrect?
A. Market demand consists of the combined demand of all the participants in
the market.
B. The quantity demanded of a good, say a loaf of bread, depends heavily on
the availability of the good.
C. The quantity demanded of a good depends on the income of consumers.
D. The quantity demanded of a good also depends on the prices of related
goods (complements and substitutes).
E. Demand decisions have to be analysed independently of the supply
situation.
Question 40
Which one of the following is not a determinant of the quantity of a good that is
demanded?
A. The availability of the good.
B. The price of the good.
C. The income of consumers.
D. The prices of substitutes.
E. The prices of complements.
Question 41
Which one of the following is incorrect?
Demand can be expressed:
A. in terms of the supply of the good.
B. using words.
C. using graphs.
D. using numbers.
E. using equations.
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Question 42
Which one of the following statements is correct?
A. We cannot analyse demand without using the ceteris paribus assumption.
B. Ceteris paribus means that all possible changes are taken into account.
C. With the ceteris paribus assumption we can allow at least three changes
to occur simultaneously.
D. With the ceteris paribus assumption everything is changing at the same
time.
E. The ceteris paribus assumption applies to demand schedules but not to
demand curves.
Question 43
Which one of the following statements is incorrect?
A. A demand curve illustrates the quantities demanded at different prices, on
the assumption that all other possible influences on the quantity
demanded remain unchanged.
B. There is an inverse relationship between the price of the product and the
quantity demanded of that product.
C. A conventional demand curve normally slopes downward from left to right.
D. The inverse relationship between the price of a product and the quantity
demanded is called the law of demand.
E. We cannot analyse the demand for a product without considering the
availability of the product.
Question 44
Which one of the following statements is incorrect?
A. A movement along a demand curve relates to the slope of the curve.
B. A movement along a demand curve is called a change in the quantity
demanded.
C. A shift of a demand curve relates to the position of the curve.
D. A shift of a demand curve relates to the intercept of the curve.
E. There is no real difference between a shift of a demand curve and a
change in the quantity demanded.
Question 45
Which one of the following statements is incorrect?
A. A movement along a demand curve for bananas indicates what happens
to the quantity demanded if the price of bananas changes.
B. A movement along a demand curve is referred to as a change in demand.
C. A shift of a demand curve is also referred to as a change in demand.
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D. The whole demand curve represents the demand for the product (eg
bananas).
E. A change in the quantity demanded refers to a movement from one point
along a demand curve to another point along the same demand curve.
Question 46
Which one of the following will not give rise to an increase in the demand for
pumpkins?
A. A decrease in the price of pumpkins.
B. An increase in the income of consumers.
C. An increase in the number of consumers in the market.
D. An increase in the price of butternuts (a substitute).
E. A research finding which indicates that eating pumpkins helps to avoid
certain serious diseases.
Question 47
Which one of the following will not give rise to a decrease in the demand for
butter, illustrated by a leftward shift of the demand curve?
A. An increase in the price of butter.
B. A decrease in consumers’ incomes.
C. A decrease in the number of consumers in the market.
D. A decrease in the price of margarine (a substitute).
E. A research finding which indicates that butter is bad for your health.
Question 48
Which one of the following will give rise to an increase in the quantity of
margarine demanded, illustrated by a movement along the demand curve?
A. A decrease in the price of margarine.
B. An increase in consumers’ incomes.
C. An increase in the number of consumers.
D. An increase in the price of butter (a substitute).
E. A research finding which indicates that margarine is good for your health.
Question 49
Which one of the following will give rise to a decrease in the quantity of
margarine demanded, illustrated by a movement along the demand curve?
A. A decrease in consumers’ incomes.
B. A decrease in the price of butter (a substitute).
C. A decrease in the number of consumers.
D. An increase in the price of margarine.
E. A research finding which indicates that margarine is bad for your health.
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Question 50
Which one of the following will not give rise to a rightward shift of the demand
curve for beef?
A. An increase in the number of consumers.
B. An increase in the price of mutton (a substitute).
C. An increase in consumers’ income.
D. A decrease in the price of beef.
E. A decrease in the price of potatoes (a complement).
Question 51
Which one of the following statements is incorrect?
A. An increase in the price of bus trips will lead to an increase in the demand
for train trips (a substitute).
B. An increase in the price of bus trips will lead to a decrease in the quantity
of bus trips demanded.
C. An increase in consumers’ incomes will result in an increase in the
demand for a normal good, illustrated by a rightward shift of the demand
curve.
D. A decrease in the price of bus trips will lead to an increase in the demand
for bus trips, illustrated by a rightward shift of the demand curve.
E. A change in demand is illustrated by a shift of the demand curve.
Question 52
Which one of the following does not influence the supply of precast concrete
walls?
A. The demand for precast concrete walls.
B. The price of precast concrete walls.
C. The price of concrete.
D. The wages of workers in the industry.
E. The state of technology.
Question 53
Which one of the following will not lead to an increase in the supply of precast
concrete walls, illustrated by a rightward shift of the supply curve?
A. A decrease in wage rates in the industry.
B. A decrease in the price of concrete.
C. A decrease in the price of cement.
D. An increase in the price of precast concrete walls.
E. An improvement in technology pertaining to the manufacture of precast
concrete walls.
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Question 54
Which one of the following will not lead to a decrease in the supply of precast
concrete walls, illustrated by a leftward shift of the supply curve?
A. A decrease in the price of precast concrete walls.
B. An increase in wage rates in the industry.
C. An increase in the price of concrete stone.
D. An increase in the price of cement.
E. An increase in the cost of machinery required to manufacture the concrete
slabs.
Question 55
Which one of the following will result in a decrease in the quantity of precast
concrete walls supplied, illustrated by a downward movement along the supply
curve?
A. An increase in wage rates in the industry.
B. A decline in productivity in the industry.
C. An increase in the price of cement.
D. A decrease in the price of precast concrete walls.
E. An increase in the cost of equipment required to manufacture concrete
slabs.
Question 56
Which one of the following statements is incorrect?
A. Supply can be expressed in words.
B. Supply can be expressed without the ceteris paribus assumption.
C. Supply can be expressed as a table.
D. Supply can be expressed as an equation.
E. Supply can be expressed graphically.
Question 57
Which one of the following statements is incorrect?
A. An increase in supply is illustrated by a rightward shift of the supply
curve.
B. An increase in the quantity supplied is illustrated by an upward
movement along the supply curve.
C. There is a positive relationship between the price of a product and the
quantity supplied.
D. A decrease in supply is illustrated by a downward movement along the
supply curve.
E. A supply curve illustrates the quantities supplied at different prices,
ceteris paribus.
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Question 58
Which one of the following statements is incorrect?
A. If the market price is above the equilibrium price, a market surplus will
develop.
B. If the market price is below the equilibrium price, there will be an
excess demand for the product.
C. If the market price is below the equilibrium price, a market shortage
will develop.
D. If the market price is above the equilibrium price, there will be an
excess supply of the product.
E. If the market price is above the equilibrium price, the quantity
demanded is greater than the quantity supplied.
Question 59
Which one of the following statements is incorrect?
At equilibrium:
A. demand is equal to supply.
B. the quantity demanded is equal to the quantity supplied.
C. there is no excess demand.
D. there is no excess supply.
E. there is no market surplus.
Question 60
The consumer surplus is:
A. the difference between what consumers pay and the maximum
amount that they are willing to pay to obtain the goods in question.
B. what is left after consumers have bought their monthly groceries.
C. what consumers have left after all their monthly needs have been
satisfied.
D. the difference between what consumers earn and what they spend.
E. the positive difference between consumers’ income and their
expenditure.
Question 61
The producer surplus is:
A. always greater than the consumer surplus.
B. the difference between producers’ revenue and their cost of
production.
C. the difference between the price that producers receive and the lowest
prices at which they are willing to supply the different quantities.
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D. what producers have left after all their expenses have been paid.
E. simply another term for profit.
Question 62
Use the following information to answer the questions below:
The demand and supply curves are represented by the following equations:
Qd = 100 – P and Qs = 50 + P
Question (a)
The equilibrium price is:
A. 150
B. 75
C. 50
D. 25
E. 10
Question (b)
The equilibrium quantity is:
A. 150
B. 75
C. 50
D. 25
E. 10
Question 63
Use the following information to answer questions 63a and 63b.
The demand and supply curves are represented by the following equations:
Qd = 30 – 2P and Qs = 10 + 2P
Question (a)
The equilibrium price is:
A. 5
B. 10
C. 15
D. 20
E. 25
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Question (b)
The equilibrium quantity is:
A. 5
B. 10
C. 20
D. 30
E. 40
Question 64
Which one of the following statements is incorrect?
A. Demand refers to plans of households, not to actual events.
B. A change in the price of guavas will result in a change in the quantity
of guavas demanded.
C. The demand for a product depends on the availability of the product.
D. The market demand is the sum of all the individual demands.
E. An increase in demand indicates that greater quantities of the good
are demanded at the different prices.
Question 65
Which one of the following statements is correct?
A. Equilibrium is often observed in our daily lives.
B. A market is in equilibrium when the quantity demanded is equal to the
quantity supplied.
C. A market is in equilibrium when demand is equal to supply.
D. At any price above the equilibrium price there will be an excess
demand for the product.
E. At any price below the equilibrium price excess supply will put
downward pressure on the price.
Question 66
The market demand curve for a good:
A. indicates the equilibrium price in the market.
B. indicates the equilibrium quantity in the market.
C. indicates the quantities that consumers actually bought during the
previous week.
D. indicates the quantities that consumers plan to buy at different prices.
E. indicates the quantities that firms will produce at each price.
Question 67
Which one of the following will definitely not give rise to a change in the demand
for raincoats (illustrated by a shift of the demand curve)?
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A. A decrease in the price of raincoats.
B. An increase in rainfall.
C. A decrease in rainfall.
D. An increase in the number of sunny days.
E. A decrease in the number of sunny days.
Question 68
Which one of the following will definitely cause a decrease in the equilibrium
price of bananas?
A. A simultaneous increase in both demand and supply.
B. A simultaneous decrease in both demand and supply.
C. An increase in demand combined with a decrease in supply.
D. A decrease in demand combined with an increase in supply.
Question 69
If the price of Croxley writing pads increases and the quantity of Croxley writing
pads increases, it is likely that the:
A. demand for Croxley writing pads has decreased.
B. supply of Croxley writing pads has decreased.
C. demand for Croxley writing pads has increased.
D. supply of Croxley writing pads has increased.
E. demand for and supply of Croxley writing pads have both decreased.
Question 70
Suppose the equilibrium price for a tin of baked beans is R5 but that the price is
set at R6. Will the price of R6 per tin be maintained?
A. Yes, because consumers are buying as much as they want at that price.
B. Yes, because suppliers are fulfilling their plans.
C. No, because there is an excess demand for baked beans at that price.
D. No, because there is a surplus of unsold baked beans at that price.
E. Yes, because there is no reason for consumers or suppliers to change
their plans.
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Question 71
If there is a surplus of good X on the market:
A. the price of X will tend to rise.
B. the government should apply price control, to prevent an increase in the
price of X.
C. the price of X will tend to fall.
D. the government should set a minimum price to avoid a fall in the price of
X.
E. the price of X will remain unchanged.
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