Instructions
For each question, read Statements I, II and III carefully and choose the correct option.
A. Statements I and II are correct.
B. Statements II and III are correct.
C. Statements I and III are correct.
D. Statements I, II and III are correct.
Topic 1: Meaning of Demand
Q1.
Rahul wants to buy a laptop for his studies and has enough money to purchase it.
I. Demand involves a willingness to buy a good or service.
II. The ability to pay is an important part of effective demand.
III. Every desire for a product automatically becomes demand.
Q2.
Meena wants an expensive smartphone but does not have enough money to buy it.
I. Meena has effective demand because she wants the smartphone.
II. Desire alone is not sufficient to constitute effective demand.
III. The ability to purchase is necessary for effective demand.
Q3.
A shopkeeper studies how many notebooks consumers are willing and able to buy at different prices during a particular week.
I. Demand is concerned with the quantity consumers are willing and able to buy.
II. Demand refers only to a person’s desire, regardless of ability to buy.
III. A particular time period can be relevant when describing quantity demanded.
Q4.
A family decides how much rice to purchase for the coming month.
I. Demand can relate to goods as well as services.
II. Demand is connected with consumers’ willingness and ability to buy.
III. The quantity demanded can be considered for a particular period.
Q5.
A student says, “I would love to own a sports car, but I cannot afford one.”
I. The student’s desire alone does not necessarily represent effective demand.
II. Purchasing ability is important for demand.
III. Every strong desire is automatically market demand.
Topic 2: Law of Demand
Q6.
The price of apples falls while consumers’ income, preferences and other relevant factors remain unchanged.
I. Consumers may demand more apples at the lower price.
II. The law of demand generally shows an inverse relationship between price and quantity demanded.
III. The law of demand states that price and quantity demanded normally move in the same direction.
Q7.
A cinema reduces its ticket price and notices that more people want to purchase tickets.
I. A lower price can encourage consumers to buy more.
II. The law of demand assumes other relevant factors remain unchanged.
III. The relationship between price and quantity demanded is generally direct.
Q8.
The price of a school bag increases while other relevant factors remain unchanged.
I. The quantity demanded will generally decrease.
II. This situation is consistent with the law of demand.
III. The law of demand generally shows an inverse relationship between price and quantity demanded.
Q9.
A bakery reduces the price of a popular cake, and customers buy more cakes.
I. This can be explained by the law of demand.
II. The law of demand means that every fall in price must increase demand without considering any other factor.
III. A movement caused by a change in the product’s own price is generally a movement along the demand curve.
Q10.
A product becomes more expensive while consumers’ income and preferences remain unchanged.
I. Quantity demanded will generally fall according to the law of demand.
II. The law of demand describes an inverse relationship between price and quantity demanded.
III. A rise in price necessarily shifts the entire demand curve to the left.
Topic 3: Demand Schedule and Demand Curve
Q11.
A student prepares a table showing different prices of a product and the quantities consumers are willing and able to buy.
I. The table can be called a demand schedule.
II. A demand schedule must always be drawn as a graph.
III. The information in the schedule can be used to construct a demand curve.
Q12.
A teacher asks students to convert a demand schedule into a graph.
I. A demand curve shows the relationship between price and quantity demanded.
II. A demand curve is generally downward sloping.
III. A demand schedule and a demand curve can present the same basic relationship in different forms.
Q13.
A demand schedule shows that consumers are willing to buy more units at a lower price.
I. The schedule provides information about price and quantity demanded.
II. Quantity demanded can never change when price changes.
III. The information can be represented graphically.
Q14.
A student draws a demand curve from a demand schedule.
I. The price of the good is generally shown on the vertical axis.
II. Quantity demanded is generally shown on the horizontal axis.
III. A demand curve helps illustrate the relationship between price and quantity demanded.
Q15.
A shopkeeper records quantities consumers are willing to buy at several prices.
I. Such a record can be used as a demand schedule.
II. The information can be plotted to obtain a demand curve.
III. A demand schedule has no connection with the demand curve.
Topic 4: Meaning of Supply
Q16.
A farmer has 1,000 kg of wheat but decides to offer only 700 kg for sale at the current market price.
I. The entire 1,000 kg must automatically be treated as quantity supplied.
II. Quantity supplied refers to the quantity producers are willing and able to offer for sale.
III. Goods merely kept in storage are not necessarily part of the quantity supplied.
Q17.
A manufacturer decides how many units to offer for sale at the current market price.
I. Supply is related to producers’ willingness to sell.
II. Supply also involves the producer’s ability to offer the product.
III. Supply is simply the total physical stock of a product in existence.
Q18.
A fruit seller has 100 kg of oranges but offers only 60 kg for sale today.
I. The 100 kg in storage is necessarily the quantity supplied.
II. The quantity actually offered for sale can be different from total stock.
III. Supply is concerned with the quantity producers are willing and able to sell.
Q19.
A producer plans the amount of a product to offer at different possible market prices.
I. Supply can be studied in relation to price.
II. Supply is unrelated to producers’ selling decisions.
III. Quantity supplied refers to the amount offered for sale at a particular price and period.
Q20.
A bakery decides how many cakes to offer for sale during the day.
I. Supply concerns the quantity sellers are willing and able to offer.
II. Supply can be measured for a particular period.
III. The quantity supplied is always equal to the total number of cakes the bakery owns.
Topic 5: Law of Supply
Q21.
The price received by a producer increases while other relevant factors remain unchanged.
I. The producer may be willing to supply more.
II. The law of supply generally shows a direct relationship between price and quantity supplied.
III. The law of supply states that quantity supplied normally falls when price rises.
Q22.
A toy manufacturer offers more toys for sale after the market price rises.
I. This response is consistent with the law of supply.
II. The law of supply assumes other relevant factors remain unchanged.
III. Price and quantity supplied generally move in opposite directions.
Q23.
A farmer reduces the quantity of vegetables offered for sale after the market price falls.
I. The response can be consistent with the law of supply.
II. The law of supply generally shows a positive relationship between price and quantity supplied.
III. A fall in price must always increase quantity supplied.
Q24.
A producer responds to a higher selling price by offering more units.
I. Higher prices can provide an incentive to supply more.
II. The law of supply generally describes a direct relationship between price and quantity supplied.
III. The law of supply assumes other relevant factors remain unchanged.
Q25.
A producer observes that the market price of a product has fallen.
I. The law of supply generally predicts a fall in quantity supplied, other things remaining unchanged.
II. The law of supply describes an inverse relationship between price and quantity supplied.
III. A fall in price does not necessarily mean that the producer must supply more.
Topic 6: Supply Schedule and Supply Curve
Q26.
A producer makes a table showing how many units will be offered for sale at different prices.
I. The table can be called a supply schedule.
II. A supply schedule can be converted into a supply curve.
III. A supply schedule must always be presented as a graph.
Q27.
A supply schedule shows higher quantities supplied at higher prices.
I. The schedule records a relationship between price and quantity supplied.
II. The relationship can be represented graphically.
III. A supply curve is generally upward sloping.
Q28.
A student plots points from a supply schedule on a graph.
I. Price and quantity supplied can be represented on a graph.
II. The resulting supply curve generally slopes upward.
III. A supply schedule and supply curve cannot represent related information.
Q29.
A farmer prepares a table showing the quantity of grain he would offer at different prices.
I. The table is an example of a supply schedule.
II. The table provides no information about price.
III. The information can be used to draw a supply curve.
Q30.
A producer uses a supply schedule to understand how the quantity offered changes at different prices.
I. A supply schedule can help identify the relationship between price and quantity supplied.
II. A supply curve is a graphical representation of this relationship.
III. The supply curve generally slopes downward.
Topic 7: Equilibrium Price and Equilibrium Quantity
Q31.
At ₹50, consumers want to buy 500 units and producers are willing to sell 500 units.
I. Quantity demanded equals quantity supplied.
II. ₹50 can be the equilibrium price under the given conditions.
III. 500 units can be called the equilibrium quantity.
Q32.
At a particular price, consumers want to buy more than producers are willing to sell.
I. Quantity demanded is greater than quantity supplied.
II. The market is in equilibrium.
III. The situation represents a shortage.
Q33.
At one price, quantity demanded and quantity supplied are equal.
I. The market can be described as being in equilibrium.
II. A surplus must exist at this price.
III. The quantity exchanged at this equilibrium can be called equilibrium quantity.
Q34.
A market reaches a price at which the amount buyers want equals the amount sellers offer.
I. The price can be called the equilibrium price.
II. The corresponding quantity can be called equilibrium quantity.
III. Equilibrium represents equality between quantity demanded and quantity supplied.
Q35.
A seller says, “At the current price, buyers want exactly the number of units that all sellers together are willing to provide.”
I. This describes market equilibrium.
II. There is no excess demand or excess supply at that point.
III. The corresponding price can be called the equilibrium price.
Topic 8: Surplus and Shortage
Q36.
At the current price, sellers offer 1,000 units while consumers want only 700 units.
I. The market has a surplus of 300 units.
II. Quantity supplied is greater than quantity demanded.
III. The situation can result in unsold goods.
Q37.
At the current price, consumers want 900 units but sellers offer only 600 units.
I. There is a shortage of 300 units.
II. Quantity demanded exceeds quantity supplied.
III. The market has excess unsold stock.
Q38.
A market experiences a shortage.
I. Consumers want to buy more than producers are willing to sell at the current price.
II. Quantity demanded is greater than quantity supplied.
III. A shortage means that sellers have more unsold goods than consumers want.
Q39.
A shop has a large quantity of unsold goods because sellers have offered more than consumers want to buy.
I. The situation represents a surplus.
II. Quantity supplied exceeds quantity demanded.
III. The situation represents a shortage.
Q40.
A product is sold at a price where consumers demand more units than producers offer.
I. There is excess demand.
II. The market has a shortage.
III. Some consumers may be unable to obtain the product at that price.
Topic 9: Changes in Demand and Their Effect on Equilibrium
Q41.
A product suddenly becomes more popular among consumers while supply conditions remain unchanged.
I. Demand increases.
II. The demand curve can shift to the right.
III. The supply curve must also shift to the right.
Q42.
More consumers start preferring a particular fruit while production conditions remain unchanged.
I. An increase in demand can raise equilibrium price.
II. An increase in demand can raise equilibrium quantity when supply responds normally.
III. The increase in demand necessarily means that supply has decreased.
Q43.
A product becomes less popular and consumers demand less of it, while supply conditions remain unchanged.
I. A decrease in demand can lower equilibrium price.
II. A decrease in demand necessarily increases equilibrium quantity.
III. A decrease in demand can lower equilibrium quantity.
Q44.
Demand for umbrellas rises before a period of heavy rain, while supply conditions remain unchanged.
I. The increase in demand can create a new market equilibrium.
II. Equilibrium price may rise.
III. Equilibrium quantity may also rise when supply is upward sloping.
Q45.
Consumers’ preference for a product decreases significantly.
I. The demand curve can shift to the left.
II. Equilibrium price can fall if supply conditions remain unchanged.
III. Equilibrium quantity can also fall.
Topic 10: Changes in Supply and Their Effect on Equilibrium
Q46.
A new technology makes production easier and allows producers to offer more at existing prices.
I. This can represent an increase in supply.
II. An increase in supply can lower equilibrium price when demand remains unchanged.
III. An increase in supply can raise equilibrium quantity.
Q47.
Bad weather reduces agricultural production while demand remains unchanged.
I. Supply can decrease.
II. A decrease in supply can raise equilibrium price.
III. A decrease in supply must increase equilibrium quantity.
Q48.
Production costs fall for a product, making producers willing to supply more at existing prices.
I. This can cause an increase in supply.
II. An increase in supply can increase equilibrium quantity.
III. An increase in supply can reduce equilibrium price when demand remains unchanged.
Q49.
A rise in input costs makes producers willing to supply fewer units at existing prices.
I. This can cause a decrease in supply.
II. A decrease in supply can put upward pressure on equilibrium price.
III. A decrease in supply can reduce equilibrium quantity.
Q50.
A technological improvement allows producers to offer more units at different prices.
I. The supply curve can shift to the right.
II. Equilibrium quantity can increase if demand remains unchanged.
III. Equilibrium price can fall if demand remains unchanged.
Topic 11: Real-World Deviations — Necessities, Luxury Goods, Perishables and Expectations
Q51.
A family continues purchasing essential medicines even after their prices rise.
I. Necessities may be less responsive to price changes than many non-essential goods.
II. The importance of a product can influence consumers’ response to price changes.
III. Every necessity has exactly the same demand response as every luxury good.
Q52.
A consumer decides not to buy an expensive designer watch after its price increases.
I. Luxury goods can sometimes be more sensitive to price changes.
II. A luxury good must be purchased regardless of its price.
III. The nature and importance of a good can influence consumer behaviour.
Q53.
A fruit seller knows that fresh strawberries will spoil quickly.
I. Perishability can affect the seller’s decision about when and how to sell the product.
II. Perishable goods have a limited usable life.
III. Perishable goods can always be stored indefinitely without affecting their quality.
Q54.
Consumers expect the price of a product to rise next month.
I. Some consumers may decide to buy more today.
II. Expectations about future prices can affect present demand.
III. Expectations can never influence current purchasing decisions.
Q55.
Consumers expect a product to become difficult to obtain in the near future.
I. Some consumers may increase present purchases.
II. Expectations about future availability can influence current demand.
III. Present buying decisions are completely unrelated to expectations about the future.
Topic 12: Price Ceilings and Shortages
Q56.
The government fixes a legal maximum price below the equilibrium price.
I. This is a price ceiling.
II. A binding price ceiling can create a shortage.
III. A binding price ceiling necessarily creates a surplus.
Q57.
A maximum legal price is set below the equilibrium price.
I. Consumers may want to buy more at the controlled lower price.
II. Producers may be willing to supply less at that price.
III. The difference can create excess demand or shortage.
Q58.
The government sets a maximum legal price above the equilibrium price.
I. The price ceiling may be non-binding.
II. A non-binding price ceiling necessarily creates a shortage.
III. The market may continue operating at the equilibrium price because the ceiling does not restrict it.
Q59.
A binding price ceiling creates a shortage.
I. Quantity demanded can exceed quantity supplied.
II. Some consumers may fail to obtain the product at the controlled price.
III. A shortage means that every consumer who wants the product can obtain it.
Q60.
A government introduces a maximum price to make an essential product more affordable.
I. The policy can lower the legal price consumers are allowed to pay.
II. If the ceiling is binding, it can create excess demand.
III. A binding ceiling guarantees that all consumers receive the product.
Topic 13: Black Markets
Q61.
A shortage develops under a binding price ceiling, and some sellers secretly charge buyers more than the legal maximum.
I. Such unofficial trading can be part of a black market.
II. Charging more than the legal maximum violates the price restriction.
III. The transaction is part of the official legal market.
Q62.
A product is difficult to obtain through the official market, and some sellers secretly offer it at a higher price.
I. A shortage can create conditions in which unofficial trading may develop.
II. Such unofficial trading can be described as a black market.
III. A black market necessarily follows all official government price rules.
Q63.
A government legally fixes the maximum price of a scarce product, but some sellers secretly charge a higher price.
I. The unofficial transaction can be considered black-market activity.
II. The seller is complying with the price ceiling by charging more than the legal maximum.
III. The transaction occurs outside the official legal market.
Q64.
Long queues and limited availability appear after a binding price ceiling is imposed, and unofficial sellers begin offering the product at higher prices.
I. The shortage can encourage some buyers to seek alternative sources.
II. Unofficial sales above the legal price can be associated with a black market.
III. Black-market transactions are necessarily legal transactions.
Q65.
A buyer cannot obtain a product through the official market and purchases it secretly from an unofficial seller at a higher price.
I. The transaction may represent black-market activity.
II. A shortage in the official market can create an incentive for such unofficial trading.
III. The higher unofficial price automatically makes the transaction legal.
Topic 14: Market Failures — Externalities and Information Asymmetry
Q66.
A factory produces a useful product but also releases pollution that harms nearby residents.
I. The pollution can be a negative externality.
II. Nearby residents are third parties affected by the production activity.
III. The pollution cannot be considered an economic problem because the factory and its customers agree on a price.
Q67.
A buyer purchases a used car without knowing that the seller knows about a serious hidden defect.
I. The buyer and seller do not have equal information.
II. The situation can involve information asymmetry.
III. Information asymmetry means both sides necessarily have exactly the same information.
Q68.
A factory’s production creates pollution that affects people who are neither buyers nor sellers in the transaction.
I. The effect on third parties can be called an externality.
II. The pollution is a negative externality.
III. Such external effects can contribute to market failure.
Q69.
A seller knows that a product has a serious defect but does not tell the buyer.
I. The seller has information that the buyer does not have.
II. This is an example of information asymmetry.
III. The buyer and seller have exactly the same information about the product.
Q70.
A factory’s production benefits consumers but creates harmful air pollution for nearby residents.
I. The pollution imposes a cost on third parties.
II. The pollution is a negative externality.
III. The external cost can contribute to market failure.
Topic 15: Public Goods
Q71.
A city provides street lighting that benefits people using public roads.
I. Many people can benefit from street lighting.
II. It can be difficult to exclude individual people from receiving its benefit.
III. These characteristics are associated with the idea of a public good.
Q72.
A government provides a public service that can benefit many people and from which it is difficult to exclude non-payers.
I. Difficulty of exclusion can be a characteristic of a public good.
II. Public goods can provide benefits to many people.
III. A public good must always be used by only one person at a time.
Q73.
A service provides benefits to many people, and preventing non-payers from receiving the benefit is difficult.
I. Such a service may have characteristics of a public good.
II. Difficulty of exclusion is relevant to identifying public goods.
III. Public goods must always be privately sold separately to every person who benefits.
Q74.
A government considers providing a service because private sellers may find it difficult to charge every person who benefits from it.
I. Difficulty in excluding beneficiaries can be relevant to public goods.
II. Public goods can provide benefits beyond individual purchasers.
III. The characteristics of public goods can make their provision different from ordinary private goods.
Q75.
A service is available to many people, and it is difficult to prevent people from benefiting from it even when they do not directly pay.
I. Difficulty of exclusion is an important characteristic associated with public goods.
II. The service can provide benefits to many people.
III. Such characteristics can help explain why governments may have a role in providing certain public goods.
DETAILED ANSWER KEY
Topic 1: Meaning of Demand
Q1 — A
Statements I and II are correct. Demand involves willingness to buy and the ability to purchase. Statement III is incorrect because desire alone is not sufficient.
Q2 — B
Statement I is incorrect because desire alone does not create effective demand. Statements II and III are correct.
Q3 — C
Statements I and III are correct. Statement II is incorrect because demand is more than a simple desire.
Q4 — D
All three statements are correct. Demand can apply to goods and services and is considered in terms of willingness, ability, quantity and time.
Q5 — A
Statements I and II are correct. Statement III is incorrect because an unaffordable desire is not necessarily effective demand.
Topic 2: Law of Demand
Q6 — B
Statements I and II are correct. Statement III is incorrect because the law of demand generally describes an inverse relationship.
Q7 — A
Statements I and II are correct. Statement III is incorrect because the relationship is generally inverse.
Q8 — D
All three statements are correct. A rise in price generally reduces quantity demanded, other relevant factors remaining unchanged.
Q9 — C
Statements I and III are correct. Statement II is incorrect because the law of demand does not say that every price fall automatically increases demand regardless of other factors.
Q10 — A
Statements I and II are correct. Statement III is incorrect because a change in own price generally causes movement along the demand curve, not a shift of the entire curve.
Topic 3: Demand Schedule and Demand Curve
Q11 — C
Statements I and III are correct. Statement II is incorrect because a demand schedule is normally a table.
Q12 — D
All three statements are correct.
Q13 — A
Statements I and III are correct. Statement II is incorrect because quantity demanded can change with price.
Q14 — D
All three statements are correct under the conventional demand-curve representation.
Q15 — A
Statements I and II are correct. Statement III is incorrect because a demand schedule is directly related to the demand curve.
Topic 4: Meaning of Supply
Q16 — B
Statement I is incorrect because all available stock is not necessarily offered for sale. Statements II and III are correct.
Q17 — A
Statements I and II are correct. Statement III is incorrect because supply is not simply total physical stock.
Q18 — B
Statements II and III are correct. Statement I is incorrect because total stored stock is not necessarily quantity supplied.
Q19 — C
Statements I and III are correct. Statement II is incorrect because supply is connected with sellers’ decisions.
Q20 — A
Statements I and II are correct. Statement III is incorrect because total ownership and quantity supplied are not necessarily the same.
Topic 5: Law of Supply
Q21 — A
Statements I and II are correct. Statement III is incorrect because the law of supply generally describes a direct relationship.
Q22 — A
Statements I and II are correct. Statement III is incorrect because the relationship is generally positive/direct.
Q23 — A
Statements I and II are correct. Statement III is incorrect.
Q24 — D
All three statements correctly describe the law of supply.
Q25 — A
Statements I and III are correct. Statement II is incorrect because the law of supply generally describes a direct relationship, not an inverse relationship.
Topic 6: Supply Schedule and Supply Curve
Q26 — A
Statements I and II are correct. Statement III is incorrect because a supply schedule is normally a table.
Q27 — D
All three statements are correct.
Q28 — A
Statements I and II are correct. Statement III is incorrect because a supply schedule and supply curve represent related information.
Q29 — C
Statements I and III are correct. Statement II is incorrect because the table explicitly contains price information.
Q30 — A
Statements I and II are correct. Statement III is incorrect because the supply curve is generally upward sloping.
Topic 7: Equilibrium Price and Equilibrium Quantity
Q31 — D
All three statements are correct because quantity demanded equals quantity supplied at the stated price.
Q32 — B
Statements II and III are incorrect? No. Therefore the correct option is C: Statements I and III are correct. Statement II is incorrect because the market is not in equilibrium when demand exceeds supply.
Q33 — C
Statements I and III are correct. Statement II is incorrect because a surplus does not exist at equilibrium.
Q34 — D
All three statements correctly describe equilibrium.
Q35 — D
All three statements are correct. The situation describes equality between demand and supply with no excess demand or supply.
Topic 8: Surplus and Shortage
Q36 — D
All three statements correctly describe a surplus of 300 units.
Q37 — A
Statements I and II are correct. Statement III is incorrect because unsold stock is associated with surplus, not shortage.
Q38 — A
Statements I and II are correct. Statement III is incorrect.
Q39 — A
Statements I and II are correct. Statement III is incorrect.
Q40 — D
All three statements correctly describe a shortage.
Topic 9: Changes in Demand and Their Effect on Equilibrium
Q41 — A
Statements I and II are correct. Statement III is incorrect because an increase in demand does not require a simultaneous shift in supply.
Q42 — A
Statements I and II are correct. Statement III is incorrect because increased demand does not mean supply has decreased.
Q43 — C
Statements I and III are correct. Statement II is incorrect because a fall in demand generally reduces equilibrium quantity.
Q44 — D
All three statements are correct when supply is upward sloping and other relevant factors remain unchanged.
Q45 — D
All three statements are correct. A fall in demand can shift the demand curve leftward and lower equilibrium price and quantity, other conditions remaining unchanged.
Topic 10: Changes in Supply and Their Effect on Equilibrium
Q46 — D
All three statements are correct under the stated conditions.
Q47 — A
Statements I and II are correct. Statement III is incorrect because a decrease in supply generally reduces equilibrium quantity.
Q48 — D
All three statements correctly describe the likely effects of increased supply.
Q49 — D
All three statements are correct.
Q50 — D
All three statements are correct under unchanged demand conditions.
Topic 11: Real-World Deviations
Q51 — A
Statements I and II are correct. Statement III is incorrect because necessities and luxury goods need not have identical price responses.
Q52 — C
Statements I and III are correct. Statement II is incorrect because luxury goods are not purchased regardless of price.
Q53 — A
Statements I and II are correct. Statement III is incorrect because perishability limits storage.
Q54 — A
Statements I and II are correct. Statement III is incorrect because expectations can affect present decisions.
Q55 — A
Statements I and II are correct. Statement III is incorrect because present decisions can be influenced by expectations.
Topic 12: Price Ceilings and Shortages
Q56 — A
Statements I and II are correct. Statement III is incorrect because a binding price ceiling can create a shortage.
Q57 — D
All three statements are correct.
Q58 — A
Statements I and III are correct. Statement II is incorrect because a non-binding ceiling does not necessarily create a shortage.
Q59 — A
Statements I and II are correct. Statement III is incorrect because a shortage means some consumers may not obtain the product.
Q60 — B
Statements II is correct and III is incorrect, while I is also correct. Therefore the correct answer is A, not B.
Corrected Q60 answer: A.
Topic 13: Black Markets
Q61 — A
Statements I and II are correct. Statement III is incorrect because black-market transactions are outside the official legal market.
Q62 — A
Statements I and II are correct. Statement III is incorrect.
Q63 — C
Statements I and III are correct. Statement II is incorrect because charging above the legal maximum violates the price ceiling.
Q64 — A
Statements I and II are correct. Statement III is incorrect because black-market transactions are not necessarily legal.
Q65 — A
Statements I and II are correct. Statement III is incorrect because an unofficial higher price does not make a transaction legal.
Topic 14: Market Failures
Q66 — A
Statements I and II are correct. Statement III is incorrect because pollution can be an important economic externality.
Q67 — A
Statements I and II are correct. Statement III is incorrect because information asymmetry means information is unequal.
Q68 — D
All three statements correctly describe a negative externality.
Q69 — A
Statements I and II are correct. Statement III is incorrect.
Q70 — D
All three statements are correct. Pollution affects third parties and represents a negative externality that can contribute to market failure.
Topic 15: Public Goods
Q71 — D
All three statements correctly describe important characteristics associated with public goods.
Q72 — A
Statements I and II are correct. Statement III is incorrect because public goods are not defined by exclusive one-person use.
Q73 — A
Statements I and II are correct. Statement III is incorrect because public goods need not be privately sold separately to every beneficiary.
Q74 — D
All three statements are correct.
Q75 — D
All three statements are correct. Difficulty of exclusion and benefits to many people are important characteristics associated with public goods, and these features help explain why governments may have a role in providing some public goods.
FINAL TABULAR ANSWER KEY
| Q. | Ans. | Q. | Ans. | Q. | Ans. |
| 1 | A | 26 | A | 51 | A |
| 2 | B | 27 | D | 52 | C |
| 3 | C | 28 | A | 53 | A |
| 4 | D | 29 | C | 54 | A |
| 5 | A | 30 | A | 55 | A |
| 6 | B | 31 | D | 56 | A |
| 7 | A | 32 | C | 57 | D |
| 8 | D | 33 | C | 58 | C |
| 9 | C | 34 | D | 59 | A |
| 10 | A | 35 | D | 60 | A |
| 11 | C | 36 | D | 61 | A |
| 12 | D | 37 | A | 62 | A |
| 13 | A | 38 | A | 63 | C |
| 14 | D | 39 | A | 64 | A |
| 15 | A | 40 | D | 65 | A |
| 16 | B | 41 | A | 66 | A |
| 17 | A | 42 | A | 67 | A |
| 18 | B | 43 | C | 68 | D |
| 19 | C | 44 | D | 69 | A |
| 20 | A | 45 | D | 70 | D |
| 21 | A | 46 | D | 71 | D |
| 22 | A | 47 | A | 72 | A |
| 23 | A | 48 | D | 73 | A |
| 24 | D | 49 | D | 74 | D |
| 25 | A | 50 | D | 75 | D |