Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good decreases, the quantity demanded increases, holding all other factors constant.

Question 2

Given the demand function $$Q = 286 - 20p$$ and the supply function $$Q = 88 + 40p$$, what is the equilibrium price?

Accepted Answer

$$p = 3.30$$

Question 3

If the price of beef increases, what is the likely effect on the demand curve for pork, assuming beef and pork are substitutes?

Accepted Answer

The demand curve for pork shifts to the right.

Question 4

Suppose the inverse demand curve for pork is $$p = 14.30 - 0.05Q. By $$how much must the price change for consumers to buy 1 million more kg of pork per year?

Accepted Answer

$$\Delta p = -0.05$$

Question 5

Which of the following is NOT a determinant of supply?

Accepted Answer

Consumer tastes

Question 6

If the supply function for pork is $$Q = 178 + 40p - 60p_h$$ and $$p_h$$ increases by $$1$$, what happens to the equilibrium price of pork?

Accepted Answer

It increases by $$1$$

Question 7

A quota is imposed on foreign steel imports. What happens to the total supply curve for steel in the U.S. market once the quota is reached?

Accepted Answer

The total supply curve becomes steeper beyond the quota.

Question 8

Which of the following best describes market equilibrium?

Accepted Answer

The price at which quantity demanded equals quantity supplied.

Question 9

If a binding price ceiling is imposed below the equilibrium price, what is the likely result?

Accepted Answer

Excess demand

Question 10

Given the general demand function $$Q = D(p, p_b, p_c, Y)$$, which variable represents the price of a substitute good?

Accepted Answer

$$p_b$$

Question 11

Suppose the demand for a good is $$Q = a - bp$$ and the supply is $$Q = c + ep. $$What is the equilibrium price in terms of $$a, b, c, e$$?

Accepted Answer

$$p^* = \frac{a - c}{b + e}$$

Question 12

Which of the following government interventions would most likely cause the quantity demanded to differ from the quantity supplied?

Accepted Answer

A price ceiling

Question 13

In a perfectly competitive market, which of the following is NOT true?

Accepted Answer

There are significant barriers to entry.

Question 14

If a binding minimum wage is imposed above the equilibrium wage in a labor market, what is the likely outcome?

Accepted Answer

Excess supply of labor (unemployment)

Question 15

If the supply function for pork is $$Q = 88 + 40p$$ and the price increases from $$p = 3.30 to$$ $$p = 4.30$$, what is the change in quantity supplied?

Accepted Answer

$$\Delta Q = 40$$

Question 16

Which of the following would cause a shift of the supply curve to the left?

Accepted Answer

An increase in the price of inputs

Question 17

If the demand for broadband service by small firms at a price of 40¢ per Kbps is $$Q_s = 10$$ million Kbps and by large firms is $$Q_l = 11.5$$ million Kbps, what is the total market demand at this price?

Accepted Answer

$$Q = 21.5$$ million Kbps

Question 18

Which of the following best explains why supply need not equal demand in the presence of a price ceiling?

Accepted Answer

The quantity that consumers want to buy exceeds the quantity that firms want to sell at the ceiling price.

Question 19

A ban on rice imports in Japan causes which of the following effects?

Accepted Answer

The supply curve shifts to the left and price increases.

Supply and Demand: Foundations of Market Equilibrium and Government Intervention

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