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

If the money price of a movie ticket is $$15 and the money price of a meal is 10$$, what is the relative price of a movie ticket in terms of meals?

Accepted Answer

$$ \frac{15}{10} = 1.5 $$ meals

Question 3

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

Accepted Answer

The quantity demanded decreases.

Question 4

Which effect explains why a rise in the price of a good causes consumers to buy less of it and more of other goods?

Accepted Answer

Substitution effect

Question 5

If the price of energy bars increases from $$1.00 to 2.00$$, and the quantity demanded falls from 15 million to 7 million bars per week, what does this illustrate?

Accepted Answer

A movement up along the demand curve

Question 6

Which of the following would cause the demand curve for electric cars to shift rightward?

Accepted Answer

An increase in consumer income, assuming electric cars are a normal good

Question 7

If the price of a complement for coffee (such as cream) falls, what happens to the demand for coffee?

Accepted Answer

The demand for coffee increases.

Question 8

Which of the following statements is true about inferior goods?

Accepted Answer

Demand for an inferior good decreases as income increases.

Question 9

A firm will supply a good only if:

Accepted Answer

It can at least cover its marginal cost of production.

Question 10

Which of the following events will shift the supply curve for smartphones rightward?

Accepted Answer

A technological advancement that lowers production costs

Question 11

If the price of a substitute in production for wheat (such as corn) falls, what happens to the supply of wheat?

Accepted Answer

The supply of wheat increases.

Question 12

Suppose a natural disaster destroys a large portion of the orange crop. What is the likely effect on the supply curve for oranges?

Accepted Answer

The supply curve shifts leftward.

Question 13

Market equilibrium occurs when:

Accepted Answer

The quantity demanded equals the quantity supplied.

Question 14

If the price of energy bars is set at $2.00, 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 15

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

Accepted Answer

Equilibrium quantity increases; equilibrium price is uncertain.

Question 16

A decrease in demand and an increase in supply will result in:

Accepted Answer

A lower equilibrium price; the change in equilibrium quantity is uncertain.

Question 17

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 18

Which of the following is an example of a movement along the supply curve?

Accepted Answer

A rise in the price of the good itself

Question 19

Suppose the government announces that the price of gasoline will rise next month. What is the likely effect on the current demand for gasoline?

Accepted Answer

Current demand will increase.

Question 20

If the population of a city increases, what is the likely effect on the demand for housing in that city?

Accepted Answer

The demand for housing increases.

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

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