Question 1

Which of the following best describes the difference between a movement along the demand curve and a shift of the demand curve for a normal good?

Accepted Answer

A movement along the demand curve is caused by a change in the price of the good, while a shift of the demand curve is caused by a change in factors such as income, preferences, or the prices of other goods.

Question 2

Suppose the demand for a product is given by $$Q_D = 20 - 2P$$ and the supply is given by $$Q_S = 4P - 8. $$What is the equilibrium price and quantity?

Accepted Answer

Equilibrium price is $$P = 4$$, equilibrium quantity is $$Q = 12.$$

Question 3

If the price of hamburger increases, what is the most likely effect on the demand for chicken (a substitute) and ketchup (a complement to hamburger)?

Accepted Answer

The demand for chicken will increase, and the demand for ketchup will decrease.

Question 4

Which of the following is an example of an inferior good?

Accepted Answer

As income rises, demand for instant noodles decreases.

Question 5

A new technology reduces the cost of producing electric cars. What is the most likely effect on the market supply curve for electric cars?

Accepted Answer

The supply curve will shift to the right.

Question 6

In the circular flow diagram, which of the following best describes the flow of money and goods between households and firms?

Accepted Answer

Goods and services flow from firms to households, while money flows from households to firms in exchange for these goods and services.

Question 7

If the market price is above the equilibrium price, which of the following will occur?

Accepted Answer

There will be excess supply (a surplus), causing the price to fall.

Question 8

Which of the following best explains why the demand curve for most goods slopes downward?

Accepted Answer

As the price of a good falls, the quantity demanded increases due to the law of demand.

Question 9

Suppose a freeze destroys a large portion of the coffee crop, shifting the supply curve for coffee to the left. What will happen to the equilibrium price and quantity of coffee?

Accepted Answer

Equilibrium price will increase, and equilibrium quantity will decrease.

Question 10

Which of the following is NOT a determinant of supply?

Accepted Answer

Household tastes and preferences.

Question 11

A firm is deciding how much of a product to supply. Which of the following factors will NOT shift the firm's supply curve?

Accepted Answer

A change in the price of the product itself.

Question 12

If the demand for quinoa increases due to a rise in vegetarianism, but the supply is limited by production constraints, what is the most likely outcome in the quinoa market?

Accepted Answer

The equilibrium price will rise, and the equilibrium quantity will increase only slightly.

Question 13

Which of the following equations represents a linear demand curve where $$P is $$price, $$Q is $$quantity, $$a is $$the price intercept, and $$b is $$the slope?

Accepted Answer

$$P = a - bQ$$

Question 14

Which of the following best describes a normal good?

Accepted Answer

A good for which demand increases as income increases.

Question 15

Suppose the supply curve for a product is $$Q_S = -5 + 3P$$ and the demand curve is $$Q_D = 25 - 2P. $$What is the equilibrium price?

Accepted Answer

$$P = 6$$

Question 16

Which of the following is an example of a complement in consumption?

Accepted Answer

Printers and ink cartridges.

Question 17

If households expect their future income to increase, what is the most likely effect on their current demand for normal goods?

Accepted Answer

Current demand for normal goods will increase.

Question 18

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good increases, the quantity supplied increases, ceteris paribus.

Question 19

Which of the following is NOT considered a factor of production?

Accepted Answer

Money used to buy stocks.

Question 20

A new government regulation increases the cost of producing newspapers. What is the most likely effect on the equilibrium price and quantity of newspapers, assuming demand remains unchanged?

Accepted Answer

Equilibrium price will rise, and equilibrium quantity will fall.

Demand, Supply, and Market Equilibrium: Core Concepts in Microeconomics

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