When the maximum price is fixed below the equilibrium price, which of the following occurs as a result? Excess supply Excess demand Black marketing
Both 2 and 3
When the maximum price (price ceiling) is set below the equilibrium price, the following happens:
Excess Demand: Since the price is low, more consumers want to buy the product, but producers are not willing to supply as much at the lower price, leading to a shortage.
Black Marketing: Due to the shortage, some sellers may illegally sell the product at higher prices.
Excess Supply would happen if the price is set above the equilibrium, not below.
Correct Answer: (3) Both 2 and 3
Important Questions from Price determination under different market forms
The demand curve that a firm faces in a perfectly competitive market is perfectly _______________ ; it is a _____________straight line at the market price.
For a monopolist, profit is maximized at that level of output where:
A price ceiling below the equilibrium price of a commodity leads to
A. Commodity glut in market
B. Shortage of commodity
C. Demand erosion
D. Black marketing
Choose the correct answer from the options given below:
Given below are two statements, one is labelled as Assertion A and the other is labelled as Reason R
Assertion A: An oligopolist firm cannot decide the price it wishes to charge as well as the quantity it wishes to sell, both at the same time.
Reason R: An oligopolist firm takes into consideration the competitor's actions and counter actions because of a strong interdependence among the competitive firms
In light of the above statements, choose the most appropriate answer form the options given below
Firm A acquirers firm B. Market price of shares of B is Rs. 20 per share and EPS is Rs. 5. For an exchange ratio of 1.5 ∶ 1, what was the P/E ratio used in acquiring firm B ?
