Question 1

Suppose the market for apples is in equilibrium. If a new technology reduces the cost of production for apple farmers, what will happen to the equilibrium price and quantity in the market?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 2

Which of the following best describes consumer surplus?

Accepted Answer

The area below the demand curve and above the equilibrium price.

Question 3

If the demand for a good increases while the supply remains constant, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 4

Producer surplus is defined as:

Accepted Answer

The difference between the price producers receive and the minimum price they are willing to accept.

Question 5

Which equation correctly represents total surplus in a market?

Accepted Answer

$$TS = CS + PS$$

Question 6

A price ceiling set below the equilibrium price will result in:

Accepted Answer

A shortage of the good.

Question 7

If the government imposes a tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 8

Which of the following is true about the relationship between marginal cost (MC) and average cost (AC)?

Accepted Answer

When $$MC = AC$$, $$AC is at $$its minimum.

Question 9

Suppose the demand curve for a product shifts to the left. What is the most likely cause?

Accepted Answer

A decrease in the price of a substitute good.

Question 10

If the marginal benefit (MB) of consuming an additional unit of a good is less than the marginal cost (MC), what should a rational consumer do?

Accepted Answer

Decrease consumption of the good.

Question 11

Which of the following best describes the effect of a binding price floor?

Accepted Answer

It creates a surplus.

Question 12

If the supply curve shifts to the right, which of the following is most likely to occur?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 13

Which of the following is the correct formula for marginal cost (MC)?

Accepted Answer

$$MC = \frac{\Delta TC}{\Delta Q}$$

Question 14

A decrease in the price of a complement good will cause the demand curve for the original good to:

Accepted Answer

Shift to the right.

Question 15

Which area on a supply and demand graph represents producer surplus?

Accepted Answer

The area above the supply curve and below the equilibrium price.

Question 16

If a market is not in equilibrium, what will naturally occur?

Accepted Answer

Prices will adjust until quantity supplied equals quantity demanded.

Question 17

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated.

Question 18

If the government imposes a per-unit tax on a good, what happens to consumer and producer surplus?

Accepted Answer

Both consumer and producer surplus decrease.

Question 19

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Microeconomics Study Guide: Demand, Supply, Surplus, and Market Equilibrium

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