Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market in which there are many buyers and sellers, and each has a negligible impact on the market price.

Question 2

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 3

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

Accepted Answer

A decrease in the price of ice cream cones.

Question 4

Suppose the price of iPhones falls. What is the likely effect on the demand curve for music downloads, assuming they are complements?

Accepted Answer

The demand curve for music downloads shifts to the right.

Question 5

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

Accepted Answer

Bus rides, for which demand decreases as income rises.

Question 6

If the price of coffee beans increases, what is the likely effect on the demand for coffee machines, assuming they are complements?

Accepted Answer

The demand for coffee machines decreases.

Question 7

Which of the following variables causes a movement along the demand curve, rather than a shift of the demand curve?

Accepted Answer

Price of the good itself

Question 8

A new study reveals that eating ice cream improves memory. What is the likely effect on the market demand curve for ice cream?

Accepted Answer

The demand curve shifts to the right.

Question 9

If Netflix and Crave are substitutes, what happens to the demand for Netflix when the price of Crave increases?

Accepted Answer

The demand for Netflix increases.

Question 10

Suppose the number of buyers in the market for electric cars increases. What is the effect on the market demand curve for electric cars?

Accepted Answer

The demand curve shifts to the right.

Question 11

Which of the following best illustrates the concept of ceteris paribus in demand analysis?

Accepted Answer

Assuming all other factors remain constant except the price of the good.

Question 12

If pasta is an inferior good, what happens to the demand curve for pasta when consumers' incomes rise?

Accepted Answer

The demand curve shifts to the left.

Question 13

A public health campaign successfully convinces people to stop smoking. What is the effect on the demand curve for cigarettes?

Accepted Answer

The demand curve shifts to the left.

Question 14

Which of the following scenarios would NOT shift the demand curve for hamburgers?

Accepted Answer

A change in the price of hamburgers.

Question 15

Suppose the demand for a good is given by $$ Q_d = 20 - 2P . If $$the price increases from $$ P = 4  to$$ $$ P = 6 $$, what is the change in quantity demanded?

Accepted Answer

Decrease by 4 units

Question 16

If the price of music downloads falls, what happens in the market for music downloads?

Accepted Answer

There is a movement down along the demand curve to a higher quantity demanded.

Question 17

Which of the following is true about market demand?

Accepted Answer

It is the sum of all individual demand curves, added horizontally.

Question 18

A fall in the price of CDs, which are substitutes for music downloads, will have what effect on the demand for music downloads?

Accepted Answer

The demand curve for music downloads shifts to the left.

Question 19

Which of the following best explains why the demand curve for most goods is downward sloping?

Accepted Answer

As the price of a good rises, consumers substitute away from it to other goods.

Chapter 4: The Market Forces of Supply and Demand (Part 1)

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