Quiz: Markets and Competitive Equilibrium — 13 questions

1. Regarding the labor protections introduced in 1841, which statements are correct?

A. The law prohibited work by children under eight in companies with over twenty employees.

B. The law concerned children under eight in companies employing more than twenty people.

C. The law prohibited employment of children under eight in companies exceeding twenty employees.

D. The law covered children under ten in companies employing more than twenty workers.

E. The law applied to every workplace employing children, regardless of workforce size.

Answer: (A), (B), (C)

Explanation

The 1841 law prohibited work by children under eight in companies employing more than twenty people. It did not apply to all workplaces or to every minor, so the remaining statements accurately restate the rule’s scope.

2. Which chronology correctly describes major French labor-market regulations?

A. Doctor Villermé’s report shocked public opinion in 1840.

B. The SMIC was established in 1970.

C. Freedom of association and the right to strike were established in 1884.

D. Paid holidays were introduced in 1936.

E. The SMIG was established in 1950.

Answer: (A), (B), (C), (D), (E)

Explanation

The stated chronology is: freedom of association and the right to strike in 1884, paid holidays in 1936, SMIG in 1950, and SMIC in 1970. Each proposition matches one of these milestones.

3. Concerning property rights and their legal protection, which statements are correct?

A. Usus refers to the right to derive income from an asset.

B. A patent is a property title over an invention that protects its inventor legally.

C. Article 17 of the 1789 Declaration calls property an inviolable and sacred right.

D. Abusus includes the right to sell or transform an asset.

E. Fructus refers to the right to use an asset.

Answer: (B), (C), (D)

Explanation

Article 17 of the 1789 Declaration characterizes property as an inviolable and sacred right. A patent protects an inventor’s property right, while usus, fructus, and abusus refer respectively to use, income, and sale or transformation.

4. Regarding patents and innovation, which statements are correct?

A. A patent concerns an invention rather than an unrelated market exchange.

B. A patent grants a property title over an invention.

C. A patent can encourage innovation by protecting inventions.

D. A patent is primarily a mechanism for freely diffusing knowledge.

E. A patent legally protects the inventor’s rights.

Answer: (A), (B), (C), (E)

Explanation

A patent is a property title over an invention that legally protects the inventor and encourages innovation. Diffusion of knowledge promotes technical progress, but it is not the definition of a patent.

5. The three prerogatives attached to property rights over an asset include which statements?

A. Abusus designates the right to derive income from an asset.

B. Fructus designates the right to derive income from an asset.

C. Abusus designates the right to sell or transform an asset.

D. Usus designates the right to use an asset.

E. Fructus designates the right to transform an asset.

Answer: (B), (C), (D)

Explanation

The three prerogatives are usus, fructus, and abusus. Usus means use, fructus means deriving income, and abusus includes selling or transforming the asset.

6. Which conditions characterize a pure and perfectly competitive market?

A. It requires freedom of entry and exit alongside mobile production factors.

B. It requires identical products and transparent information for market participants.

C. It requires differentiated products protected by technological barriers.

D. It requires a very large number of buyers and sellers.

E. It requires a small number of producers able to influence market prices.

Answer: (A), (B), (D)

Explanation

Pure and perfect competition combines atomicity, free market access, homogeneous products, transparent information, and mobile production factors. Product homogeneity concerns the products themselves, whereas information transparency concerns market knowledge.

7. Regarding atomicity in perfect competition, which statement or statements are correct?

A. Atomicity requires enough participants to prevent individual price influence.

B. Atomicity applies when individual buyers and sellers cannot affect price.

C. Atomicity allows one dominant producer to set the market price.

D. Atomicity describes the freedom of firms to enter and leave the market.

E. Atomicity concerns the number of buyers and sellers in the market.

Answer: (A), (B), (E)

Explanation

Atomicity means that many buyers and sellers participate, preventing any single actor from influencing price. Market access is instead addressed by freedom of entry and exit, not atomicity.

8. Concerning the relationship between price, supply, and demand, select the correct statement or statements:

A. Supply and demand respond identically to changes in price.

B. Producers may offer more at higher prices to pursue greater profit.

C. Demand generally increases when the market price rises.

D. Consumers demand more when a price reduction eases budget constraints.

E. Supply generally increases when the market price rises.

Answer: (B), (D), (E)

Explanation

Supply generally rises with price because producers seek greater profit, while demand generally falls with price under consumers’ budget constraints. The two relationships therefore move in opposite directions.

9. Market equilibrium and disequilibrium situations can be described as follows:

A. An excess reflects overproduction at a price above equilibrium.

B. Equilibrium determines a market price and quantity through supply and demand.

C. An excess occurs when demand exceeds supply below the equilibrium price.

D. A shortage occurs when demand exceeds supply at a price below equilibrium.

E. Equilibrium is defined by a price differing from the market-clearing price.

Answer: (A), (B), (D)

Explanation

Market equilibrium is determined by the confrontation of supply and demand. An excess occurs above equilibrium, whereas a shortage occurs below equilibrium.

10. Regarding the construction of market supply and demand, which statement or statements are correct?

A. Market demand equals the sum of individual consumer demands.

B. Market supply is determined from individual demands alone.

C. Market demand excludes the quantities requested by individual consumers.

D. Market supply equals the sum of individual producer supplies.

E. Market equilibrium results from confronting aggregate supply and demand.

Answer: (A), (D), (E)

Explanation

Market supply is obtained by adding individual supplies, and market demand by adding individual demands. Equilibrium is then determined through the confrontation of these aggregate relationships.

11. Which factors are recognized as major determinants of demand?

A. Consumer preferences and income can influence demand independently of price.

B. The buyer’s income influences the demand relationship.

C. The price of the good affects demand behavior.

D. Production technology is one of the three main demand determinants.

E. Consumer preferences influence the quantity demanded.

Answer: (A), (B), (C), (E)

Explanation

The main determinants of demand are preferences, the good’s price, and buyer income. Preferences and income shift demand, whereas price produces movement along the demand relationship.

12. Which statements correctly describe price elasticity of demand and rate of variation?

A. Price elasticity is expressed without a measurement unit.

B. The rate of variation is multiplied by 100 after division by the initial value.

C. The rate of variation uses the initial value minus the final value.

D. Price elasticity compares percentage changes in demand and price.

E. Price elasticity divides the rate of demand variation by the rate of price variation.

Answer: (A), (B), (D), (E)

Explanation

Price elasticity of demand is the rate of variation of demand divided by the rate of variation of price, and it has no unit. The rate of variation uses the final-minus-initial change divided by the initial value, multiplied by 100.

13. A product’s price rises from €2 to €4 while demand falls from 40 units to 20 units. Which statement is correct?

A. The demand has unitary elasticity because its absolute elasticity equals 1.

B. The demand variation is −50%.

C. The price elasticity of demand is −0.5.

D. The demand is strongly elastic because its absolute elasticity exceeds 1.

E. The price variation is 100%.

Answer: (B), (C), (E)

Explanation

From €2 to €4, price rises by 100%, while demand falls from 40 to 20, a decrease of 50%; therefore elasticity is −0.5. An elasticity with absolute value below 1 is weak, not strong or unitary.