Question 1

Suppose the supply curve for wheat is $$Q_s = 1800 + 240P$$ and the demand curve is $$Q_d = 3550 - 266P. $$What is the equilibrium price and quantity in this market?

Accepted Answer

$$P^* = 3.46$$, $$Q^* = 2630$$

Question 2

If the price of a substitute good increases, what is the expected effect on the demand curve for the original good?

Accepted Answer

The demand curve shifts to the right

Question 3

Which of the following best describes a market equilibrium?

Accepted Answer

The price at which quantity supplied equals quantity demanded

Question 4

A vertical demand curve represents which type of elasticity?

Accepted Answer

Perfectly inelastic demand

Question 5

If a government imposes a price ceiling below the equilibrium price, what is the likely market outcome?

Accepted Answer

A shortage will develop

Question 6

Given the demand curve $$Q = a - bP$$, what happens to the price elasticity of demand as price increases?

Accepted Answer

Elasticity increases in magnitude

Question 7

Suppose a drought shifts the supply curve for wheat to the left, raising the price from $$P = 3.46 to$$ $$P = 4.00. If $$the new quantity demanded is $$Q = 2486$$, what is the price elasticity of demand at this point, given $$Q_d = 3550 - 266P$$?

Accepted Answer

$$E_p = -0.43$$

Question 8

Which of the following is true about the long-run price elasticity of demand for gasoline compared to the short-run?

Accepted Answer

Long-run elasticity is greater than short-run elasticity

Question 9

If the supply of unskilled workers increases rapidly but demand rises only slightly, what is the expected effect on wages for unskilled workers?

Accepted Answer

Wages will decrease or grow slowly

Question 10

Which formula correctly expresses the price elasticity of demand?

Accepted Answer

$$E_p = \frac{\% \Delta Q}{\% \Delta P}$$

Question 11

After a freeze damages Brazil's coffee trees, what is the expected short-term effect on the price of coffee in New York?

Accepted Answer

The price of coffee will increase

Question 12

If both the supply and demand curves shift to the right, what is the expected effect on equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases, price may increase slightly

Question 13

Which of the following is a plausible reason for the supply curve of eggs to shift downward?

Accepted Answer

Production costs for eggs decrease

Question 14

What is the effect of a rightward shift in the demand curve for college education, assuming supply is also increasing?

Accepted Answer

Both price and enrollment will rise

Question 15

Which of the following best describes a cyclical industry?

Accepted Answer

An industry in which sales magnify cyclical changes in GDP and national income

Question 16

If the demand for a good is perfectly elastic, what does the demand curve look like?

Accepted Answer

It is horizontal

Question 17

Suppose the supply curve for natural gas is $$Q = 15.90 + 0.72P_g + 0.05P_o$$ and the demand curve is $$Q = 0.02 - 1.8P_g + 0.69P_o. If$$ $$P_g = 3.00$$ and $$P_o = 50$$, what is the excess demand created by price controls?

Accepted Answer

0.5 trillion cubic feet

Question 18

Which of the following is true about the supply of primary copper in the short run versus the long run?

Accepted Answer

Supply is more elastic in the long run

Question 19

If the price elasticity of supply for wheat is calculated as $$E_s = \frac{\Delta Q}{\Delta P} 	imes \frac{P}{Q}$$ and at $$P = 3.46$$, $$Q = 2630$$, $$\Delta Q = 240$$, what is $$E_s$$?

Accepted Answer

$$E_s = 0.36$$

Question 20

Which of the following is a correct statement about the effect of income on the demand for normal goods?

Accepted Answer

An increase in income shifts the demand curve to the right

Chapter 2: Basics of Supply and Demand – Microeconomics Study Notes

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