Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and sellers, none of whom can influence the price.

Question 2

Suppose the price of an input used in the production of bicycles decreases. What is the most likely effect on the supply curve for bicycles?

Accepted Answer

The supply curve will shift to the right, indicating an increase in supply.

Question 3

If the price of gasoline rises significantly, what is the expected impact on the demand for cars and public transportation?

Accepted Answer

Demand for cars decreases; demand for public transportation increases.

Question 4

Which of the following is an example of a movement along the supply curve rather than a shift of the supply curve?

Accepted Answer

A change in the price of the good itself.

Question 5

Consider the market for smartphones and smartphone apps. If the price of smartphones decreases, what happens to the demand for smartphone apps?

Accepted Answer

Demand for smartphone apps increases.

Question 6

Which equation correctly represents the market equilibrium condition?

Accepted Answer

$$Q_s = Q_d$$

Question 7

If the government reduces the fees and red tape associated with new business licenses, what is the expected effect on the supply curve for new businesses?

Accepted Answer

The supply curve will shift to the right.

Question 8

Suppose consumers expect the price of a new gaming console to drop next month. What is the likely effect on current demand for the console?

Accepted Answer

Current demand will decrease.

Question 9

Which of the following will cause a rightward shift in the demand curve for hamburgers?

Accepted Answer

An increase in the price of a substitute good, such as pizza.

Question 10

If the market price is set above the equilibrium price, what will occur in the market?

Accepted Answer

A surplus will occur, and price will fall.

Question 11

Which of the following is NOT a factor that shifts the supply curve?

Accepted Answer

Changes in consumer tastes.

Question 12

If both the demand and supply curves for a good shift to the right, what is the effect on equilibrium quantity?

Accepted Answer

Equilibrium quantity will definitely increase.

Question 13

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 14

Suppose the cost of wood falls. What will happen to the equilibrium price and quantity in the violin market?

Accepted Answer

Equilibrium price will fall and quantity will rise.

Question 15

If garden gnomes regain popularity, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price and quantity both rise.

Question 16

Which of the following is an example of a complement in production?

Accepted Answer

Lard in pork processing.

Question 17

If the population of an economy increases, what is the expected effect on the market demand curve for diapers?

Accepted Answer

The demand curve will shift to the right.

Question 18

Which of the following statements is a positive statement?

Accepted Answer

"An increase in the minimum wage will lead to higher unemployment among teenagers."

Question 19

Which of the following equations represents the opportunity cost of producing one more unit of good X in terms of good Y?

Accepted Answer

$$OC_{X} = \frac{\Delta Y}{\Delta X}$$

Question 20

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

Demand for the original good increases.

Supply and Demand: Foundations of Competitive Markets

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