Question 1 Not yet answered Points out of 1 P Flag question At the equilibrium p

Question

Question 1 Not yet answered Points out of 1 P Flag question At the equilibrium price, quantity demanded is equal to quantity supplied. Select one: O True O False Question2 Not yet answered Points out of 1 P Flag question Vernon Smith tested the supply and demand model in the laboratory and found that: Select one: O a. the buyers with the lowest willingness to pay bought the goods. O b.the results were not consistent with competitive price theory, as he expected O c. the model may work in real life, but it does not work in the laboratory O d. buyers and sellers quickly converged on the predicted equilibrium. Question 3Not yet answered Points oue of P Flag question r te arket priclit bloethe ita prk ich f Select one: O a. Quantity demanded will exceed quantity supplied and the market price will eventually fall. b. Quantity supplied will exceed quantity demanded and the market price will eventually rise. O c. Quantity demanded will exceed quantity supplied and the market price will eventually rise. d. Quantity supplied will exceed quantity demanded and the market price will eventually fall.

Explanation / Answer

Question 1

True.

Market equilibrium is the interaction of quantity demanded and quantity supplied.

Q.2

d. Vernon Smith found that small number of buyers and sellers could produce competitive equilibrium.

Q3.

C. If the market price is below the equilibrium price, the quantity demanded will exceed quantity supplied and there would be an upward pressure for the prices to increase.

Q4

a. Another way to test the model is observing the shifts of the demand and supply curves.

Q5

b. Smith's model predicted the market situation. Buyers with the highest value bought, sellers with the lowest cost sold, maximum efficiency was achieved.

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