Question 1

Suppose the price of lattes increases from $$3 to 4. $$According to the law of demand, what will happen to the quantity of lattes demanded, all else equal?

Accepted Answer

The quantity demanded will decrease.

Question 2

A business finds that the cost to produce each additional latte increases by $$0.10 after the 100th latte. If the cost to produce the 100th latte is 1$$, what is the cost to produce the 105th latte?

Accepted Answer

$$1 + 0.10 	imes 5 = 1.50$$

Question 3

If the market for lattes is in equilibrium at a price of $$3 and a quantity of 240 lattes per day, what will happen if a price floor is set at 4$$?

Accepted Answer

There will be excess supply (surplus) of lattes.

Question 4

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

Accepted Answer

An increase in the price of tea, a substitute for lattes.

Question 5

If the cost of coffee beans (an input for lattes) decreases, what is the most likely effect on the equilibrium price and quantity of lattes?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 6

Suppose a recession causes consumer incomes to fall. If lattes are a normal good, what happens to the demand curve for lattes?

Accepted Answer

It shifts to the left.

Question 7

If a price ceiling is set below the equilibrium price in the latte market, what is the most likely outcome?

Accepted Answer

A shortage of lattes.

Question 8

Which of the following is NOT a demand shifter for lattes?

Accepted Answer

Cost of production.

Question 9

A new technology allows latte shops to produce lattes more efficiently. What is the expected effect on the supply curve and equilibrium in the market?

Accepted Answer

Supply curve shifts right; equilibrium price falls.

Question 10

If the price of biscuits (a complement to lattes) increases, what is the likely effect on the market for lattes?

Accepted Answer

Demand for lattes decreases.

Question 11

Suppose the market demand for lattes is given by $$Q_D = 360 - 60P$$ and the market supply is $$Q_S = 60P + 100. $$What is the equilibrium price?

Accepted Answer

$$P = 3$$

Question 12

If the number of sellers in the latte market decreases, what is the expected effect on the supply curve and equilibrium price?

Accepted Answer

Supply curve shifts left; equilibrium price rises.

Question 13

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good increases, the quantity supplied increases.

Question 14

If consumers expect the price of lattes to rise in the near future, what is the likely immediate effect on the demand for lattes?

Accepted Answer

Demand will increase now.

Question 15

Suppose the government imposes a price ceiling of $$2 on lattes, but the equilibrium price is 3. $$What is the likely result?

Accepted Answer

Quantity demanded will exceed quantity supplied.

Question 16

Which of the following scenarios would most likely result in a leftward shift of the supply curve for lattes?

Accepted Answer

A decrease in the number of sellers.

Question 17

If the price of tea (a substitute for lattes) falls, what is the expected effect on the demand for lattes?

Accepted Answer

Demand for lattes decreases.

Question 18

A new health trend increases consumer preference for lattes. What is the likely effect on the equilibrium price and quantity in the latte market?

Accepted Answer

Equilibrium price and quantity both increase.

Question 19

Suppose the supply function for lattes is $$Q_S = 100 + 10P$$ and the demand function is $$Q_D = 300 - 20P. $$What is the equilibrium quantity?

Accepted Answer

$$Q = 200$$

Question 20

Which of the following is an example of a supply shifter in the latte market?

Accepted Answer

A change in the cost of milk, an input for lattes.

Demand, Supply, and Market Equilibrium: A Microeconomics Study Guide

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