Question 1

Suppose the price of coffee decreases. According to the law of demand, what will happen to the quantity demanded of coffee, ceteris paribus?

Accepted Answer

The quantity demanded will increase.

Question 2

Which of the following best describes the substitution effect?

Accepted Answer

Consumers buy more of a cheaper product instead of a more expensive one.

Question 3

If the supply curve for smartphones shifts to the right, what is the most likely cause?

Accepted Answer

A technological improvement in smartphone production

Question 4

A market is in equilibrium when:

Accepted Answer

The quantity demanded equals the quantity supplied

Question 5

Which of the following would NOT cause the demand curve for electric cars to shift?

Accepted Answer

A decrease in the price of electric cars

Question 6

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

Accepted Answer

A shortage

Question 7

Which of the following equations represents the law of demand?

Accepted Answer

$$ Q_d = f(P) $$ where $$ \frac{dQ_d}{dP} \u003c 0 $$

Question 8

A decrease in the price of steel (an input) will have what effect on the supply curve for cars, ceteris paribus?

Accepted Answer

Shift the supply curve to the right

Question 9

If both the demand and supply curves for laptops shift to the right, what happens to the equilibrium quantity?

Accepted Answer

It increases

Question 10

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

Accepted Answer

Public transportation for someone who switches to driving when income rises

Question 11

Suppose the market for oranges is in equilibrium. A sudden frost destroys half the orange crop. What is the most likely immediate effect?

Accepted Answer

The supply curve shifts to the left, raising price

Question 12

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The highest-valued alternative that must be given up to engage in an activity

Question 13

A competitive market is characterized by:

Accepted Answer

Many buyers and sellers, with no single buyer or seller able to influence the market price

Question 14

If the demand for a normal good increases as income increases, which of the following is true?

Accepted Answer

The demand curve shifts to the right

Question 15

Which of the following is the correct definition of ceteris paribus?

Accepted Answer

All else equal

Question 16

Suppose the price of athletic shoes is set above the equilibrium price. What will happen in the market?

Accepted Answer

There will be a surplus

Question 17

Which of the following best describes allocative efficiency?

Accepted Answer

Every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of production

Question 18

If the supply curve shifts to the right more than the demand curve, what happens to the equilibrium price?

Accepted Answer

It falls

Question 19

Which of the following is the correct formula for market equilibrium in terms of quantity demanded and quantity supplied?

Accepted Answer

$$ Q_d = Q_s $$

Question 20

A new government tax increases the cost of producing bottled water. What is the likely effect on the supply curve and equilibrium price, ceteris paribus?

Accepted Answer

Supply curve shifts to the left; equilibrium price rises

Microeconomics: Demand, Supply, and Market Equilibrium Study Guide

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