Question 1

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Each firm sets its own price for its product.

Question 2

Suppose the market for gasoline in Kristiansand is analyzed. Which of the following statements is most accurate based on the study materials?

Accepted Answer

The market is not perfectly competitive, but the perfectly competitive model can still provide useful insights.

Question 3

What is the law of demand?

Accepted Answer

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

Question 4

If Camilla is willing to pay 20 NOK for the 200th liter of petrol per year, what does this represent?

Accepted Answer

Her marginal willingness to pay for the 200th liter.

Question 5

Which of the following would cause a shift of the demand curve for gasoline to the right?

Accepted Answer

An increase in the number of buyers in the market.

Question 6

What is the effect of a leftward shift in the supply curve, all else equal?

Accepted Answer

Equilibrium price rises and equilibrium quantity falls.

Question 7

Suppose the market price of oil is above the equilibrium price. What is the likely outcome?

Accepted Answer

There will be excess supply, causing the price to fall.

Question 8

If the price of a substitute good for gasoline (such as electric cars) falls, what is the expected effect on the demand for gasoline?

Accepted Answer

The demand for gasoline will decrease.

Question 9

Which of the following best describes a movement along the demand curve?

Accepted Answer

A change in the price of the good itself.

Question 10

In a perfectly competitive market, what is the relationship between the price and the marginal cost for a profit-maximizing firm?

Accepted Answer

Price equals marginal cost at the profit-maximizing quantity: $$P = MC$$

Question 11

Suppose the market demand for oil is given by $$Q_D = 50 - 0.5P$$ and the market supply is $$Q_S = 0.5P. $$What is the equilibrium price?

Accepted Answer

$$P = 40$$

Question 12

Which of the following is an example of a commodity market that closely fits the perfectly competitive model?

Accepted Answer

The market for wheat.

Question 13

If both the demand and supply curves for oil shift left, but the demand shift is larger than the supply shift, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price falls, equilibrium quantity falls.

Question 14

Which of the following would NOT cause a shift in the supply curve for oil?

Accepted Answer

A change in the price of oil.

Question 15

If the marginal cost of producing the 20th billionth barrel of oil is $$100, and the market price is 80$$, what should a profit-maximizing firm do?

Accepted Answer

Decrease production.

Question 16

During the COVID-19 pandemic, both a demand shock and a supply shock hit the oil market. If demand fell more than supply, what happened to the equilibrium price?

Accepted Answer

It fell.

Question 17

Which of the following best describes the concept of 'marginal benefit'?

Accepted Answer

The additional benefit received from consuming one more unit of a good.

Question 18

If the market price is below the equilibrium price, what is the result?

Accepted Answer

Excess demand.

Question 19

Which of the following is a plausible reason for a rightward shift in the supply curve for oil?

Accepted Answer

A new oil extraction technology reduces production costs.

Question 20

If the market demand is the sum of all individual demand curves, what happens to the market demand curve if a new buyer enters the market?

Accepted Answer

It shifts to the right.

Principles of Microeconomics: Markets, Demand, and Supply

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