Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, all firms selling identical products, and no barriers to entry.

Question 2

According to the law of demand, what happens when the price of a product falls, ceteris paribus?

Accepted Answer

The quantity demanded of the product increases.

Question 3

Which effect explains why consumers buy more of a good when its price falls, making it relatively cheaper compared to other goods?

Accepted Answer

Substitution effect

Question 4

If the price of instant noodles (an inferior good) increases, what is the likely effect on its quantity demanded, assuming all else is equal?

Accepted Answer

Quantity demanded will decrease.

Question 5

Which of the following would cause a shift in the demand curve for reusable water bottles?

Accepted Answer

An increase in population.

Question 6

Reusable water bottles and gym memberships are considered:

Accepted Answer

Complements

Question 7

If a new, more efficient way of producing water bottles is discovered, what happens to the supply curve?

Accepted Answer

It shifts to the right.

Question 8

Suppose the price of bottled spring water increases. What is the likely effect on the demand for reusable water bottles?

Accepted Answer

Demand for reusable water bottles increases.

Question 9

Which variable would NOT shift the supply curve for water bottles?

Accepted Answer

A change in the price of water bottles.

Question 10

Market equilibrium occurs when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 11

If a hurricane destroys several factories producing water bottles, what is the likely effect on the market?

Accepted Answer

Supply curve shifts to the left.

Question 12

Which equation represents the market equilibrium condition?

Accepted Answer

$$Q_d = Q_s$$

Question 13

If both demand and supply for water bottles increase, what can we predict about the equilibrium quantity?

Accepted Answer

Equilibrium quantity will increase.

Question 14

A movement along the demand curve is caused by:

Accepted Answer

A change in the price of the product.

Question 15

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

Accepted Answer

A surplus will occur.

Question 16

Which of the following is an example of a normal good?

Accepted Answer

Restaurant meals

Question 17

If the price of gym memberships decreases, what is the likely effect on the demand for reusable water bottles?

Accepted Answer

Demand for reusable water bottles increases.

Question 18

Which of the following would cause a movement along the supply curve for water bottles?

Accepted Answer

A decrease in the price of water bottles.

Question 19

If Millennials and Gen Z increase their preference for reusable water bottles, what happens to the demand curve?

Accepted Answer

It shifts to the right.

Question 20

Suppose the price of a substitute good increases. What is the likely effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Chapter 3: Where Prices Come From – The Interaction of Demand and Supply (Microeconomics Study Notes)

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