Question 1

Which of the following best describes what happens when a technological advancement occurs in the production of a good, as shown in the first image?

Accepted Answer

The supply curve shifts to the right, leading to a lower equilibrium price and higher equilibrium quantity.

Question 2

Refer to the second image. If the market price is set at $$P_1$$ above equilibrium, what will occur in the market?

Accepted Answer

A surplus will occur because quantity supplied exceeds quantity demanded.

Question 3

Suppose the supply curve shifts to the right as shown in the third image. What is the effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 4

In the fourth image, the demand curve shifts to the right. What is the most likely cause of this shift?

Accepted Answer

A change in consumer tastes favoring the good.

Question 5

In the fifth image, both supply and demand curves shift to the right. What determines the direction of change in equilibrium price?

Accepted Answer

The relative magnitude of the shifts in supply and demand.

Question 6

Given the linear demand curve $$Q = a - bP$$, what happens to the price elasticity of demand as you move down the curve?

Accepted Answer

It decreases because price falls and quantity increases.

Question 7

If the price elasticity of demand is zero, what does this imply about consumer behavior?

Accepted Answer

Consumers will buy the same quantity regardless of price.

Question 8

Which formula correctly represents the arc elasticity of demand?

Accepted Answer

$$E_P = \frac{\Delta Q}{\Delta P} \cdot \frac{P}{Q}$$

Question 9

If the cross-price elasticity of demand between two goods is positive, what does this indicate?

Accepted Answer

The goods are substitutes.

Question 10

Suppose the supply of copper is more elastic in the long run than in the short run. What is the main reason for this?

Accepted Answer

Firms can add to production capacity over time.

Question 11

If a government sets a maximum price below the equilibrium price, what is the most likely market outcome?

Accepted Answer

A shortage will develop.

Question 12

Which of the following best describes the difference between short-run and long-run demand elasticity for gasoline?

Accepted Answer

Demand is more elastic in the long run because consumers can switch to more fuel-efficient cars.

Question 13

If the income elasticity of demand for a good is negative, what type of good is it?

Accepted Answer

Inferior good

Question 14

Given the supply function $$Q = c + dP$$, what happens to the quantity supplied if $$d$$ increases?

Accepted Answer

The supply curve becomes flatter and more elastic.

Question 15

If both supply and demand increase, but the increase in supply is greater than the increase in demand, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 16

Which of the following scenarios would most likely result in a perfectly elastic demand curve?

Accepted Answer

A market with many identical competitors selling at the same price.

Question 17

If the price elasticity of supply is calculated as $$E_S = \frac{\Delta Q}{\Delta P} \cdot \frac{P}{Q}$$, what does a value greater than 1 indicate?

Accepted Answer

Supply is elastic.

Question 18

Suppose the demand for automobiles is less elastic in the long run than in the short run. What is the main reason for this?

Accepted Answer

Consumers can delay purchases in the short run but must eventually replace cars.

Question 19

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 20

Which of the following is the correct sequence for solving for equilibrium price and quantity using linear supply and demand equations?

Accepted Answer

Set quantity supplied equal to quantity demanded, solve for price, substitute price into either equation to find quantity.

Supply, Demand, and Elasticity: Core Concepts and Applications

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