Question 1

Suppose the demand for electric scooters in East Lansing shifts to the right due to a rise in gas prices. Which of the following best describes the likely effect on equilibrium price and quantity, assuming supply remains unchanged?

Accepted Answer

Equilibrium price increases and equilibrium quantity increases.

Question 2

If the city of East Lansing imposes a regulation that increases the cost of providing electric scooters, which graph best depicts the likely effect on the scooter market?

Accepted Answer

Supply shifts left; equilibrium price rises and quantity falls.

Question 3

Suppose a new technology lowers the cost of producing batteries for electric scooters. What is the most likely effect on the market for scooters?

Accepted Answer

Supply increases, shifting right; equilibrium price falls and quantity rises.

Question 4

Suppose the price of cars increases and cars and trucks are substitutes. What is the most likely effect on the market for trucks?

Accepted Answer

Demand for trucks increases, causing equilibrium price and quantity to rise.

Question 5

If a price ceiling is set below the equilibrium price in a market, which of the following will occur?

Accepted Answer

A shortage, because quantity demanded exceeds quantity supplied.

Question 6

Suppose a new law is passed increasing jail sentences for buying illegal drugs. What is the most likely effect on the market for illegal drugs?

Accepted Answer

Price would increase and quantity would decrease.

Question 7

If the demand for chicken fingers increases while the cost of producing them also increases, what is the likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price increases; effect on quantity is ambiguous.

Question 8

Which of the following is an example of a binding price ceiling?

Accepted Answer

A law that sets the maximum price for concert tickets below the equilibrium price.

Question 9

Suppose a new technology reduces the cost of making wireless headphones. How will this affect the market for wireless headphones?

Accepted Answer

Supply increases; equilibrium price falls and quantity rises.

Question 10

Suppose the government sets a price floor above the equilibrium price for milk. What will be the result?

Accepted Answer

A surplus of milk, because quantity supplied exceeds quantity demanded.

Question 11

If the Uber rideshare app crashes in a city, what is the most likely effect on the market for electric scooters?

Accepted Answer

Demand for scooters increases, shifting right.

Question 12

Suppose a new law requires all electric scooters to be inspected daily, increasing costs for providers. What is the likely effect on the equilibrium price and quantity of scooter rides?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 13

Suppose a celebrity posts on social media about how much they love a new brand of animal backpacks. What is the most likely effect on the market for animal backpacks?

Accepted Answer

Demand increases, shifting right; equilibrium price and quantity both rise.

Question 14

In January 2023, Tesla announced it was cutting the price for several of its electric cars. What is the most likely effect on the market for Tesla's competitors' electric vehicles?

Accepted Answer

Demand for competitors' vehicles decreases, shifting left.

Question 15

Suppose a significant increase occurs in the price of pencils, which are used to produce paper. What is the likely effect on the market for paper?

Accepted Answer

Supply of paper decreases, shifting left; equilibrium price rises and quantity falls.

Question 16

Which of the following statements best meets the economic definition of a shortage?

Accepted Answer

A hurricane destroys most of the bourbon distilleries in North Carolina, leading to empty shelves and long lines for bottles.

Question 17

Given the following table, which statement is true?

$$\begin{array}{ccc}
	ext{Quantity Demanded} & 	ext{Price} & 	ext{Quantity Supplied} \
7 & 10 & 1 \
5 & 8 & 2 \
3 & 6 & 3 \
1 & 4 & 4 \
\end{array}$$

Accepted Answer

A price cap of $6 will result in a shortage of 2 units.

Question 18

Suppose the market for tickets to a basketball game is at equilibrium at $$200 per ticket, with 10,000 tickets available. If the price is set at 100 $$per ticket, what is the likely outcome?

Accepted Answer

There will be excess demand; more than 10,000 people will want to buy tickets.

Question 19

If both demand and supply increase in a market, what can we say about the new equilibrium?

Accepted Answer

Equilibrium quantity will increase, but the effect on price is ambiguous.

Equilibrium, Supply and Demand, and Market Interventions: Study Notes

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