Question 1

Suppose the price of coffee increases. According to the law of demand, what is most likely to happen to the quantity of coffee demanded, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 2

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

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods.

Question 3

If the cross-price elasticity of demand between tea and coffee is positive, what does this imply about the relationship between the two goods?

Accepted Answer

They are substitutes.

Question 4

A new technology reduces the cost of producing smartphones. What is the most likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve shifts to the right.

Question 5

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative foregone.

Question 6

Suppose the price elasticity of demand for a product is $$ED = 0.5. $$What does this indicate about the demand for the product?

Accepted Answer

Demand is inelastic.

Question 7

If a market is perfectly competitive, which of the following is true?

Accepted Answer

No buyer or seller can influence the market price.

Question 8

Which of the following would cause a movement along the demand curve for ice cream, rather than a shift of the curve?

Accepted Answer

A decrease in the price of ice cream.

Question 9

Given the following information: The price of good X increases by 10%, and the quantity demanded decreases by 5%. What is the price elasticity of demand for good X?

Accepted Answer

$$ED = \frac{-5\%}{10\%} = -0.5$$

Question 10

If the supply of wheat increases due to favorable weather, what is the likely effect on the equilibrium price and quantity in the wheat market?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 11

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

Availability of inputs.

Question 12

A decrease in the price of peanut butter leads to an increase in the demand for jelly. What does this suggest about the relationship between peanut butter and jelly?

Accepted Answer

They are complements.

Question 13

If the income elasticity of demand for a good is negative, what type of good is it?

Accepted Answer

Inferior good.

Question 14

Suppose the market for rental apartments is in equilibrium. If a city government imposes a rent ceiling below the equilibrium price, what is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 15

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what consumers are willing to pay and what they actually pay.

Question 16

If the supply curve for a product is vertical, what does this imply about the price elasticity of supply?

Accepted Answer

Supply is perfectly inelastic.

Question 17

A new study finds that eating avocados improves health. What is the likely effect on the demand curve for avocados?

Accepted Answer

The demand curve shifts to the right.

Question 18

Which of the following equations correctly represents the price elasticity of demand?

Accepted Answer

$$ED = \frac{	ext{percentage change in quantity demanded}}{	ext{percentage change in price}}$$

Question 19

If a good has many close substitutes, what can you say about its price elasticity of demand?

Accepted Answer

It is likely to be elastic.

Question 20

Suppose a new tax is imposed on sellers of gasoline. What is the immediate effect on the supply curve for gasoline?

Accepted Answer

The supply curve shifts to the left.

Fundamental Concepts in Microeconomics: Markets, Demand, Supply, and Elasticity

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