Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, all goods are identical, and no individual can affect the market price.

Question 2

According to the law of demand, what happens to the quantity demanded of a good when its price increases, all else equal?

Accepted Answer

Quantity demanded decreases.

Question 3

Which equation represents the equilibrium condition in a market?

Accepted Answer

$$Q^d = Q^s$$

Question 4

If the price of AirPods falls, what is the likely effect on the demand curve for music downloads?

Accepted Answer

The demand curve shifts to the right.

Question 5

Which of the following is NOT a non-price determinant of demand?

Accepted Answer

Price of the good itself

Question 6

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.

Question 7

Suppose the wages of oil rig workers fall. What happens to the supply curve for oil?

Accepted Answer

The supply curve shifts to the right.

Question 8

Which of the following best explains why supply curves slope upward?

Accepted Answer

As price rises, more suppliers (including high-cost ones) are willing to sell.

Question 9

If a technological advance allows tax return software to be produced at lower cost, what happens to the supply curve?

Accepted Answer

It shifts to the right.

Question 10

What is the result when quantity supplied exceeds quantity demanded at a given price?

Accepted Answer

Surplus

Question 11

If the market price is below equilibrium, what will sellers typically do?

Accepted Answer

Raise the price.

Question 12

Which of the following is a correct sequence for analyzing changes in equilibrium?

Accepted Answer

Identify the curve that shifts, determine the direction, use the diagram to analyze changes in $$P$$ and $$Q.$$

Question 13

If both supply and demand increase, what happens to equilibrium quantity and price?

Accepted Answer

Quantity rises, price is ambiguous.

Question 14

Given the following demand and supply equations: $$Q^d = 30 - 2P$$ and $$Q^s = 4P$$, what is the equilibrium price?

Accepted Answer

$$P = 3$$

Question 15

A fall in consumer income will have what effect on the demand for an inferior good?

Accepted Answer

Demand will increase.

Question 16

If the price of music downloads falls, what happens to the quantity demanded?

Accepted Answer

Quantity demanded increases.

Question 17

Which of the following events would shift the supply curve for oil to the left?

Accepted Answer

An increase in the wages of oil rig workers.

Question 18

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

Accepted Answer

Demand for the original good decreases.

Question 19

Suppose the market for electric cars experiences both an increase in demand (due to higher gas prices) and an increase in supply (due to new technology). What is the effect on equilibrium price?

Accepted Answer

The effect on equilibrium price is ambiguous; it depends on the relative magnitude of the shifts.

Question 20

Which of the following best describes a shortage in a market?

Accepted Answer

Quantity demanded is greater than quantity supplied.

Supply and Demand: Foundations of Market Equilibrium

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