Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where buyers and sellers trade identical goods and no individual can influence the market price.

Question 2

Suppose the price of gasoline decreases from $$3.00 to 2.00 $$per gallon. According to the law of demand, what will happen to the quantity demanded?

Accepted Answer

The quantity demanded will increase.

Question 3

Which of the following would cause a shift of the demand curve for smartphones to the right?

Accepted Answer

An increase in consumer income.

Question 4

If the price of oil rises, what happens to the quantity supplied according to the law of supply?

Accepted Answer

The quantity supplied increases.

Question 5

Which of the following is NOT a reason for a shift in the supply curve?

Accepted Answer

A change in the product's own price.

Question 6

Consider the market for roses before Valentine’s Day. What is the most likely reason for the increase in price?

Accepted Answer

A rightward shift in the demand curve.

Question 7

If a government sets a price ceiling below the competitive equilibrium price for gasoline, what is the most likely outcome?

Accepted Answer

Excess demand (shortage) of gasoline.

Question 8

Which equation represents the condition for competitive equilibrium in a market?

Accepted Answer

$$Q_d = Q_s$$

Question 9

Suppose a technological breakthrough makes oil extraction cheaper. What happens to the supply curve and equilibrium price?

Accepted Answer

The supply curve shifts right and equilibrium price falls.

Question 10

If both the demand curve and the supply curve for beer shift right before Super Bowl Sunday, what is the most likely effect on equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases, but the effect on price is ambiguous.

Question 11

Which of the following is an example of a movement along the demand curve for gasoline?

Accepted Answer

A decrease in the price of gasoline.

Question 12

If the price of brown eggs is higher than white eggs, which supply-side explanation is most consistent with microeconomic theory?

Accepted Answer

Brown eggs are more expensive to produce.

Question 13

A new interest in rock climbing leads you to take more road trips, increasing your annual gasoline consumption at the same price. Is this a movement along or a shift of your demand curve?

Accepted Answer

A shift of the demand curve to the right.

Question 14

If the government heavily taxes gasoline, raising its price from $$2.40 to 6.00 $$per gallon, what must you assume to compare quantity demanded across countries?

Accepted Answer

That consumer preferences and incomes are identical across countries.

Question 15

Which of the following would cause a leftward shift of the demand curve for oil?

Accepted Answer

Rising environmental concerns and adoption of energy-saving technologies.

Question 16

If input prices for producing smartphones increase, what happens to the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 17

Which of the following is true about movements along the supply curve?

Accepted Answer

They are caused by changes in the product's own price.

Question 18

Suppose the market price for parking permits on campus is set below equilibrium. What is the most likely result?

Accepted Answer

A shortage of parking permits.

Question 19

If the supply curve for oil shifts left due to a major exporter ceasing production, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price rises and equilibrium quantity falls.

Question 20

Which of the following best describes excess supply in a market?

Accepted Answer

When quantity supplied exceeds quantity demanded at a given price.

Chapter 4: Demand, Supply, and Equilibrium – Microeconomics Study Notes

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