Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where every buyer pays and every seller charges the same price, and no individual can influence the market price.

Question 2

If the price of gasoline increases, what is the most likely effect on the demand for large personal vehicles?

Accepted Answer

The demand for large personal vehicles will decrease.

Question 3

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

Accepted Answer

An increase in consumer income.

Question 4

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

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 5

Which equation represents the condition for market equilibrium?

Accepted Answer

$$ Q_s = Q_d $$

Question 6

If the government sets a price ceiling below the equilibrium price, what is the likely result?

Accepted Answer

A shortage will occur.

Question 7

Which of the following would NOT shift the supply curve for wheat?

Accepted Answer

A change in the price of wheat.

Question 8

If the price of peanut butter increases, what is the likely effect on the demand for jelly (a complement)?

Accepted Answer

The demand for jelly will decrease.

Question 9

A leftward shift in the demand curve for a good could be caused by:

Accepted Answer

An increase in consumer income for an inferior good.

Question 10

If the market price is above the equilibrium price, what will happen in a competitive market?

Accepted Answer

Quantity supplied will exceed quantity demanded, causing a surplus.

Question 11

Which of the following best explains why the price of roses increases before Valentine’s Day?

Accepted Answer

A rightward shift in the demand curve for roses.

Question 12

If both the demand and supply curves for a good shift to the right, what can we say about the equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 13

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

Accepted Answer

Canned meat (such as Spam)

Question 14

Suppose the government imposes a price floor above the equilibrium price. What is the likely outcome?

Accepted Answer

A surplus will occur.

Question 15

Which of the following would cause a rightward shift in the supply curve for smartphones?

Accepted Answer

A technological innovation that reduces production costs.

Question 16

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

Accepted Answer

The demand for the original good decreases.

Question 17

Which of the following is NOT a determinant of demand?

Accepted Answer

Input prices

Question 18

A movement along the supply curve is caused by:

Accepted Answer

A change in the price of the good itself.

Question 19

If the market for oil is initially in equilibrium and a war disrupts oil supply, what is the most likely immediate effect?

Accepted Answer

The supply curve shifts left, raising the equilibrium price.

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

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