Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and many sellers, so no single buyer or seller can influence the price.

Question 2

The relative price of a good is best defined as:

Accepted Answer

The ratio of its money price to the money price of the next best alternative good.

Question 3

According to the law of demand, what happens when the price of a good increases, ceteris paribus?

Accepted Answer

The quantity demanded decreases.

Question 4

Which effect explains why a rise in the price of a good decreases the quantity demanded?

Accepted Answer

Both the substitution effect and the income effect.

Question 5

If the price of a substitute for energy bars rises, what happens to the demand for energy bars?

Accepted Answer

The demand for energy bars increases.

Question 6

Which of the following would cause a rightward shift in the demand curve for pizza?

Accepted Answer

A rise in the price of spaghetti, a substitute for pizza.

Question 7

If the price of a factor of production used to produce good X rises, what happens to the supply of good X?

Accepted Answer

Supply decreases and the supply curve shifts leftward.

Question 8

Suppose the price of a good is expected to rise in the future. What is the likely effect on current supply?

Accepted Answer

Current supply decreases and the supply curve shifts leftward.

Question 9

Which of the following is true at the equilibrium price in a competitive market?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 10

If the price of energy bars is set at $2.00 per bar, and the quantity supplied is 13 million while the quantity demanded is 7 million, what is the market condition?

Accepted Answer

There is a surplus of 6 million bars.

Question 11

A technological advance lowers the cost of producing energy bars. What is the most likely effect on the market for energy bars?

Accepted Answer

The supply curve shifts rightward, price falls, and quantity increases.

Question 12

If both demand and supply for a good increase, what can be predicted about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases, but the change in equilibrium price is uncertain.

Question 13

Which of the following best describes a movement along the demand curve?

Accepted Answer

A change in the quantity demanded due to a change in the price of the good.

Question 14

If the price of a complement for good X falls, what happens to the demand for good X?

Accepted Answer

The demand for good X increases.

Question 15

Suppose the population in a city increases significantly. What is the likely effect on the market for apartments, assuming all else remains constant?

Accepted Answer

The demand for apartments increases, shifting the demand curve rightward.

Question 16

If the price of a good is below the equilibrium price, what will happen in the market?

Accepted Answer

A shortage will occur, and the price will rise.

Question 17

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

Accepted Answer

As income increases, the demand for instant noodles decreases.

Question 18

A decrease in both demand and supply will have what effect on equilibrium quantity and price?

Accepted Answer

Equilibrium quantity decreases, but the change in equilibrium price is uncertain.

Question 19

If the price of good X falls and the demand for good Y decreases, what is the relationship between goods X and Y?

Accepted Answer

Goods X and Y are substitutes.

Question 20

Suppose a natural disaster destroys a large portion of wheat crops. What is the likely effect on the wheat market?

Accepted Answer

Supply decreases, shifting the supply curve leftward, causing price to rise and quantity to fall.

Demand and Supply: Foundations of Market Equilibrium

Guida di studio - Domande di pratica

Study guide - Flashcard