Question 1

According to the law of demand, what happens to the quantity demanded of a good when its price increases, holding all else constant?

Accepted Answer

The quantity demanded decreases.

Question 2

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 3

If the price of hot dog buns increases, what is the likely effect on the demand for hot dog franks?

Accepted Answer

The demand for hot dog franks will decrease.

Question 4

Suppose the market for reusable water bottles is in equilibrium at a price of $$20 and a quantity of 5 million units. If the price is set at 25$$, what will occur in the market?

Accepted Answer

There will be a surplus of water bottles.

Question 5

Which of the following is most likely to cause a rightward shift in the supply curve for smartphones?

Accepted Answer

A technological advancement in smartphone production.

Question 6

If income increases and ramen noodles are an inferior good, what happens to the demand curve for ramen noodles?

Accepted Answer

It shifts to the left.

Question 7

A price ceiling set below the equilibrium price will result in which of the following?

Accepted Answer

A shortage.

Question 8

Which formula correctly represents consumer surplus for a single unit purchased?

Accepted Answer

$$CS = WTP - P$$

Question 9

A government imposes a price floor of $$8.00 per bushel in the wheat market, where the equilibrium price is 6.50. $$What is the likely result?

Accepted Answer

A surplus of wheat.

Question 10

If the marginal cost of producing the 4th pair of jeans is $$95 and the market price is 125$$, should the producer make the 4th pair? Why?

Accepted Answer

Yes, because $$MC \u003c P$$ and producing it increases surplus.

Question 11

Which of the following best describes deadweight loss?

Accepted Answer

The loss of economic surplus when a market is not in competitive equilibrium.

Question 12

Suppose a per-unit tax of $$7 is imposed on a good. The price buyers pay rises from 22 to$$ $$27, and the price sellers receive falls to 20. $$How much of the tax is paid by buyers?

Accepted Answer

$$5$$

Question 13

If the government sets a price ceiling above the equilibrium price, what will be the effect on the market?

Accepted Answer

There will be no effect.

Question 14

Which of the following is NOT a factor that shifts the demand curve for a good?

Accepted Answer

A change in the price of the good itself.

Question 15

A technological improvement in the production of electric cars will likely have what effect on the market for electric cars?

Accepted Answer

Shift the supply curve to the right, lowering equilibrium price and increasing equilibrium quantity.

Question 16

If both the demand and supply curves for a product shift to the right, what can we say about the new equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 17

Which of the following best explains why a decrease in the price of gasoline would increase the demand for SUVs?

Accepted Answer

Gasoline and SUVs are complementary goods.

Question 18

If the government imposes a tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left (decreases).

Question 19

Which of the following equations represents the area of a triangle used to calculate deadweight loss?

Accepted Answer

$$Area = \frac{1}{2} 	imes base 	imes height$$

Question 20

A new firm enters the market for reusable water bottles, increasing supply. What is the immediate effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Microeconomics: Demand, Supply, Market Equilibrium, and Government Intervention

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