Question 1

Which of the following best describes the law of demand?

Accepted Answer

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

Question 2

Which of the following is an example of a complementary good?

Accepted Answer

Bread and butter

Question 3

If the price of Coke increases, what is likely to happen to the demand for Pepsi, assuming they are substitute goods?

Accepted Answer

The demand for Pepsi will increase.

Question 4

Which of the following is NOT a determinant of demand?

Accepted Answer

Cost of production

Question 5

Suppose the demand for ice cream increases due to hot weather. What happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 6

A shift to the right in the supply curve indicates:

Accepted Answer

An increase in supply

Question 7

If the price of a product is set above the equilibrium price, what will occur in the market?

Accepted Answer

A surplus

Question 8

Which equation represents market demand if individual demand curves are $$Q_1 = 5 - P$ and Q_2$ = 3 - 0.5P$$?

Accepted Answer

$$Q = 8 - 1.5P$$

Question 9

Which of the following would cause a movement along the demand curve, not a shift?

Accepted Answer

A change in the price of the good itself

Question 10

If the cost of raw materials increases, what is the likely effect on the supply curve for a product?

Accepted Answer

The supply curve shifts to the left.

Question 11

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

Accepted Answer

Low-grade rice

Question 12

If the number of sellers in a market increases, what happens to the market supply?

Accepted Answer

Market supply increases

Question 13

A decrease in the price of a complementary good will:

Accepted Answer

Increase the demand for the related good

Question 14

Which of the following best describes equilibrium in a market?

Accepted Answer

Quantity supplied equals quantity demanded

Question 15

If a new technology reduces the cost of production for smartphones, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right

Question 16

Suppose the price of ice-cream cones is $2.50. According to the demand schedule, the quantity demanded is 2 cones and the quantity supplied is 10 cones. What is the market condition?

Accepted Answer

There is a surplus of 8 cones.

Question 17

Which of the following is a public good?

Accepted Answer

Police protection

Question 18

If consumers expect the price of gasoline to rise next month, what is likely to happen to current demand?

Accepted Answer

Current demand will increase

Question 19

Which of the following equations best represents the law of supply?

Accepted Answer

$$Q_s = c + dP$$, where $$d \u003e 0$$

Question 20

During a festive season, the demand for certain goods increases. What happens to the demand curve?

Accepted Answer

It shifts to the right

Supply and Demand: Foundations of Market Analysis

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