Question 1

Which of the following best describes the role of property rights in a market economy?

Accepted Answer

Property rights are legally enforceable guarantees of ownership that enable free and voluntary exchange.

Question 2

Suppose the market price for tattoos is set below the equilibrium price. What is the most likely outcome?

Accepted Answer

A shortage will occur, and prices will tend to rise.

Question 3

Which equation represents the condition for market equilibrium?

Accepted Answer

$$ Q_d = Q_s $$

Question 4

Adam Smith’s concept of the 'invisible hand' suggests that:

Accepted Answer

Individuals pursuing their own self-interest can unintentionally promote society’s welfare.

Question 5

If the price of pig feed rises, what happens to the supply curve for bacon and the equilibrium price and quantity?

Accepted Answer

Supply curve shifts left; equilibrium price rises and quantity falls.

Question 6

Which of the following is NOT a factor that can shift the demand curve?

Accepted Answer

Prices of inputs

Question 7

An increase in supply, holding demand constant, will result in:

Accepted Answer

A fall in equilibrium price and an increase in equilibrium quantity.

Question 8

Consumer surplus is best defined as:

Accepted Answer

The difference between the price a consumer is willing to pay and the price actually paid.

Question 9

Producer surplus is represented graphically as:

Accepted Answer

The area below the market price and above the marginal cost curve.

Question 10

Which of the following statements about efficient market outcomes is correct?

Accepted Answer

Efficient market outcomes maximize total surplus, where $$ MB = MC .$$

Question 11

Deadweight loss refers to:

Accepted Answer

The decrease in total surplus compared to an economically efficient outcome.

Question 12

If both demand and supply increase simultaneously, what can be predicted with certainty?

Accepted Answer

Equilibrium quantity will rise.

Question 13

Comparative statics in economics involves:

Accepted Answer

Comparing two equilibrium outcomes to isolate the effect of changing one factor at a time.

Question 14

Which of the following would cause a decrease in equilibrium price and quantity in a market?

Accepted Answer

A decrease in demand

Question 15

Suppose a new technology reduces the cost of production for a good. What is the expected effect on the supply curve and market equilibrium?

Accepted Answer

Supply curve shifts right; equilibrium price falls and quantity rises.

Question 16

Which formula best represents total surplus in a market?

Accepted Answer

$$ 	ext{Total Surplus} = 	ext{Consumer Surplus} + 	ext{Producer Surplus} $$

Question 17

In the tattoo market, if the equilibrium price is $$150 and a consumer is willing to pay 200 $$for a tattoo, what is the consumer surplus for this transaction?

Accepted Answer

$$ 50 $$

Question 18

Which of the following best describes the effect of a decrease in supply, holding demand constant?

Accepted Answer

Equilibrium price rises and equilibrium quantity falls.

Question 19

If a market produces too little of a good compared to the efficient quantity, what is the result?

Accepted Answer

Deadweight loss occurs, reducing total surplus.

Question 20

Which of the following is true about market-clearing prices?

Accepted Answer

They equalize quantity demanded and quantity supplied.

Coordinating Smart Choices: Demand and Supply in Markets

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