Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good rises, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the price of energy bars increases from $$1.00 to 2.00. $$According to the demand schedule, what happens to the quantity demanded?

Accepted Answer

It decreases from 15 million to 7 million bars per week.

Question 3

Which of the following is NOT a determinant of demand?

Accepted Answer

The price of factors of production

Question 4

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

Accepted Answer

The demand for energy bars increases.

Question 5

A rightward shift of the demand curve for energy bars could be caused by:

Accepted Answer

An increase in consumer income (assuming energy bars are a normal good)

Question 6

Which of the following statements about supply is correct?

Accepted Answer

A supply curve shows the relationship between price and quantity supplied, holding all other factors constant.

Question 7

If a technological advance reduces the cost of producing energy bars, what happens in the market for energy bars?

Accepted Answer

The supply curve shifts rightward.

Question 8

Suppose the equilibrium price of energy bars is $$1.50 and the equilibrium quantity is 10 million bars per week. If the price is set at 2.00$$, what will occur?

Accepted Answer

There will be a surplus of 6 million bars.

Question 9

Which of the following events would cause a leftward shift of the supply curve for energy bars?

Accepted Answer

A natural disaster that destroys factories

Question 10

If both demand and supply for energy bars increase, what can we predict about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases; equilibrium price is uncertain.

Question 11

A decrease in demand and an increase in supply will generally result in:

Accepted Answer

A lower equilibrium price and an uncertain change in equilibrium quantity.

Question 12

Which of the following best explains why the supply curve is upward sloping?

Accepted Answer

Because as price increases, producers are willing to supply more to cover higher marginal costs.

Question 13

If the price of a complement in production rises, what happens to the supply of the related good?

Accepted Answer

The supply of the related good increases.

Question 14

Which of the following is an example of the income effect?

Accepted Answer

When the price of energy bars rises, people buy fewer energy bars because their real income has decreased.

Question 15

Suppose the government imposes a tax on energy bars. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts leftward.

Question 16

If the population increases, what happens to the market demand for energy bars?

Accepted Answer

Market demand increases and the demand curve shifts rightward.

Question 17

Which of the following best describes market equilibrium?

Accepted Answer

It is the price at which quantity demanded equals quantity supplied.

Question 18

If the price of energy bars is below the equilibrium price, what will happen in the market?

Accepted Answer

There will be a shortage, and the price will rise.

Question 19

A decrease in the price of a complement good will have what effect on the demand for energy bars?

Accepted Answer

It will increase the demand for energy bars.

Question 20

Which of the following equations represents the opportunity cost of a good in terms of its relative price?

Accepted Answer

$$	ext{Relative price of Good X} = \frac{	ext{Money price of Good X}}{	ext{Money price of Good Y}}$$

Microeconomics: Demand, Supply, and Market Equilibrium

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