Question 1

Suppose a new technology reduces the cost of producing electric cars, while at the same time, consumer preferences shift in favor of electric cars. What can we say with certainty about the new equilibrium in the electric car market?

Accepted Answer

Equilibrium quantity will definitely increase.

Question 2

If the price of coffee increases, what is likely to happen to the demand for tea, assuming they are substitutes?

Accepted Answer

The demand for tea will increase.

Question 3

Which of the following would cause a rightward shift in the supply curve for smartphones?

Accepted Answer

A technological improvement in smartphone manufacturing.

Question 4

A price ceiling is set below the equilibrium price in the market for apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 5

If a good is an inferior good, what happens to its demand when consumer incomes rise?

Accepted Answer

Demand decreases.

Question 6

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what a consumer is willing to pay and what they actually pay.

Question 7

Suppose the government imposes a per-unit tax on gasoline. If the demand for gasoline is more inelastic than the supply, who bears the greater burden of the tax?

Accepted Answer

Consumers bear the greater burden.

Question 8

Which of the following is true about market equilibrium?

Accepted Answer

It occurs where marginal benefit equals marginal cost.

Question 9

A binding price floor is imposed in the wheat market. What is the likely effect on producer surplus and deadweight loss?

Accepted Answer

Producer surplus increases, and deadweight loss is created.

Question 10

If the price of peanut butter rises and jelly is a complement, what happens to the demand for jelly?

Accepted Answer

The demand for jelly decreases.

Question 11

Which of the following would NOT shift the demand curve for laptops?

Accepted Answer

A decrease in the price of laptops.

Question 12

Suppose the government sets a non-binding price ceiling on bread. What is the effect on the market?

Accepted Answer

No effect on the market outcome.

Question 13

If both the supply and demand for a product decrease, what can we say with certainty?

Accepted Answer

Equilibrium quantity will decrease.

Question 14

A tax of $$2 per unit is imposed on sellers. The pre-tax equilibrium price is 10$$, and the post-tax price paid by buyers is $11. What is the price received by sellers after the tax?

Accepted Answer

$9

Question 15

Which of the following best explains why deadweight loss occurs when a tax is imposed?

Accepted Answer

Because the tax causes the quantity traded to fall below the efficient level.

Question 16

If a natural disaster destroys a large portion of the orange crop, what happens to the supply curve for oranges and the equilibrium price?

Accepted Answer

Supply shifts left; equilibrium price rises.

Question 17

Which of the following is an example of a change in quantity demanded, not a change in demand?

Accepted Answer

A decrease in the price of the good itself.

Question 18

Suppose the government imposes a binding price ceiling on gasoline. Which of the following is a likely result?

Accepted Answer

A shortage of gasoline.

Question 19

If the market for a good is in equilibrium and the government imposes a tax, what happens to the sum of consumer and producer surplus?

Accepted Answer

It decreases.

Question 20

A new firm enters the market for bottled water. What is the likely effect on the supply curve and equilibrium price?

Accepted Answer

Supply shifts right; equilibrium price falls.

Microeconomics Study Guide: Demand, Supply, Market Equilibrium, and Market Interventions

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