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April 21, 2018
 
 

Exam - How Prices are Determined

1) The price of a share of stock is the point where:

a) Supply equals demand
b) Supply is greater than demand
c) Supply is less than demand
d) Cannot be determined by supply and demand

2) Which of the following is the force that acts to ration shares of stock?

a) The Securities and Exchange Commission (SEC)
b) Fear
c) Greed
d) Price

3) High prices create:

a) More buyers, more sellers
b) More buyers, fewer sellers
c) Fewer buyers, more sellers
d) Fewer buyers, fewer sellers

4) Low prices create:

a) More buyers, more sellers
b) More buyers, fewer sellers
c) Fewer buyers, more sellers
d) Fewer buyers, fewer sellers

5) What incentive do market makers have to charge the market clearing price for shares of stock?

a) They want to keep customers happy
b) They avoid stiff fines
c) They maximize their profits at this point
d) They get promoted faster

6) Who determines price?

a) The SEC
b) The NYSE
c) The marginal buyers and sellers
d) The Nasdaq

7) Why doesn't the stock market ever run out of stock?

a) Prices are allowed to adjust
b) New shares of stock can always be printed
c) There are too many shares available for that to happen
d) There are never that many buyers for that to happen

8) The market clearing price of any good is where:

a) The supply curve crosses the demand curve
b) The supply curve is greater than the demand curve
c) The supply curve is less than the demand curve
d) The market clearing price cannot be determined by supply and demand curves

9) If the price of any good is too high (relative to the supply and demand curves) you will have a:

a) Surplus of goods
b) Shortage of goods
c) Balance of goods
d) Cannot be determined

10) If the price of any good is too low (relative to the supply and demand curves) you will have a:

a) Surplus of goods
b) Shortage of goods
c) Balance of goods
d) Cannot be determined


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