Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and many sellers, so no single buyer or seller can influence the price.

Question 2

If the money price of a movie ticket is $$12 and the money price of a burger (the next best alternative) is 6$$, what is the relative price of a movie ticket in terms of burgers?

Accepted Answer

$$\frac{12}{6} = 2$$ burgers

Question 3

Which of the following is NOT a requirement for a person to demand a good?

Accepted Answer

They already own the good.

Question 4

According to the law of demand, what happens to the quantity demanded of a good when its price increases, ceteris paribus?

Accepted Answer

The quantity demanded decreases.

Question 5

Which effect explains why a rise in the price of a good causes consumers to buy less of it and more of other goods?

Accepted Answer

Substitution effect

Question 6

If the price of a substitute for energy bars rises, what happens to the demand for energy bars?

Accepted Answer

It increases.

Question 7

Which of the following would cause a movement along the demand curve for pizza, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of pizza.

Question 8

Suppose the population of a city increases significantly. What is the likely effect on the demand for public transportation?

Accepted Answer

Demand increases and the demand curve shifts rightward.

Question 9

Which of the following is an example of an inferior good?

Accepted Answer

Public transit, for which demand decreases as income rises.

Question 10

If the price of a factor of production used to make bread rises, what happens to the supply of bread?

Accepted Answer

Supply decreases and the supply curve shifts leftward.

Question 11

Which of the following best explains the law of supply?

Accepted Answer

As the price of a good rises, the quantity supplied increases.

Question 12

A technological advance in the production of electric cars will likely have what effect on the supply curve for electric cars?

Accepted Answer

Shift the supply curve rightward.

Question 13

If the price of a good is above its equilibrium price, what will occur in the market?

Accepted Answer

A surplus will occur, causing the price to fall.

Question 14

Suppose both the demand and supply for laptops increase. What can be predicted about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity will increase, but the change in equilibrium price is uncertain.

Question 15

If the demand for bottled water decreases while the supply increases, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will fall, but the change in equilibrium quantity is uncertain.

Question 16

Which of the following would cause a leftward shift of the supply curve for wheat?

Accepted Answer

A drought that destroys a large portion of the wheat crop.

Question 17

A decrease in the price of a complement in production for beef (such as leather) will have what effect on the supply of beef?

Accepted Answer

Supply of beef decreases.

Question 18

If the price of a good is below the equilibrium price, what will happen in the market?

Accepted Answer

A shortage will occur, causing the price to rise.

Question 19

Suppose the government expects the price of gasoline to rise next month. What is the likely effect on the current supply of gasoline?

Accepted Answer

Current supply decreases and the supply curve shifts leftward.

Question 20

A new study shows that eating energy bars improves health. What is the likely effect on the market for energy bars?

Accepted Answer

Demand increases and the demand curve shifts rightward.

Microeconomics: Demand and Supply – Study Notes

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