Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good rises, the quantity demanded falls, ceteris paribus.

Question 2

Suppose the market price of pizzas is $20. According to the demand curve, which of the following statements is correct?

Accepted Answer

Only the first 10,000 pizzas are purchased because their value to consumers is at least $20.

Question 3

What does the area above the market price and below the demand curve represent?

Accepted Answer

Consumer surplus

Question 4

If the price of tablet computers falls from $$300 to 100$$, what happens to the quantity demanded?

Accepted Answer

It increases.

Question 5

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

Accepted Answer

An increase in the number of pizza consumers

Question 6

What does the height of the supply curve at any given quantity represent?

Accepted Answer

The minimum price necessary to induce producers to supply that unit

Question 7

Producer surplus is best defined as:

Accepted Answer

The difference between the lowest price a supplier will accept and the market price

Question 8

If the supply of gasoline decreases due to an increase in crude oil prices, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price rises and equilibrium quantity falls.

Question 9

Which of the following is an example of a change in quantity supplied?

Accepted Answer

A decrease in the price of gasoline causes producers to supply less gasoline.

Question 10

Suppose the market for calculators is in equilibrium at a price of $$10, with quantity supplied and demanded both equal to 550. What happens if the price is set at 12$$?

Accepted Answer

There will be excess supply and downward pressure on price.

Question 11

Which of the following best describes economic efficiency in a competitive market?

Accepted Answer

All units for which the consumer’s valuation exceeds the producer’s opportunity cost are produced.

Question 12

If the demand for eggs increases during the Easter holiday, what is the likely short-run effect on equilibrium price and quantity?

Accepted Answer

Both equilibrium price and quantity rise.

Question 13

Which of the following is a characteristic of an elastic demand curve?

Accepted Answer

A small change in price leads to a large change in quantity demanded.

Question 14

What is the invisible hand principle?

Accepted Answer

Market prices coordinate the actions of individuals, leading to outcomes that are generally beneficial for society.

Question 15

Which of the following would NOT shift the supply curve for a good?

Accepted Answer

A change in the price of the good itself

Question 16

Suppose the supply of physician services is relatively inelastic. What does this imply?

Accepted Answer

A large increase in price leads to a small increase in quantity supplied.

Question 17

If a market is not in equilibrium and there is excess demand, what will happen to the price?

Accepted Answer

The price will rise.

Question 18

Which of the following is an example of a change in supply?

Accepted Answer

An increase in the cost of an input shifts the supply curve left.

Question 19

Which of the following is necessary for the market process to maximize economic efficiency?

Accepted Answer

Well-defined and enforced private property rights

Demand, Supply, and the Market Process: Core Principles and Applications

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