Question 1

Suppose the market for widgets is in equilibrium at price $$P_E = 5$$ and quantity $$Q_E = 5. If $$the current market price rises to $$P = 8$$, what will be the result in the market?

Accepted Answer

There will be a surplus of 6 units because quantity supplied exceeds quantity demanded.

Question 2

Which of the following best describes what happens when the price in a competitive market is set below the equilibrium price?

Accepted Answer

A shortage occurs because quantity demanded exceeds quantity supplied.

Question 3

If the supply curve for oil shifts left due to a geopolitical event (such as a major exporter halting production), what is the most likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 4

A technological breakthrough in oil extraction (such as fracking) causes the supply curve for oil to shift to the right. What happens to the equilibrium price and quantity in the oil market?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 5

If both demand and supply increase in a market, what can be said with certainty about the new equilibrium?

Accepted Answer

Equilibrium quantity will increase.

Question 6

Suppose the market for roses experiences a dramatic increase in demand before Valentine’s Day, but the supply is relatively fixed in the short run. What is the most likely outcome?

Accepted Answer

The price of roses increases significantly.

Question 7

In the market for notebooks, if the price is set at $$P = 17$$, the quantity demanded is 20 units and the quantity supplied is 4 units. What is the magnitude of the shortage?

Accepted Answer

$$20 - 4 = 16$$ units

Question 8

Which of the following events must cause equilibrium price to fall?

Accepted Answer

Demand decreases and supply increases.

Question 9

A tech company announces it is moving 5,000 high-income jobs to Boulder. Using the three-step method, what is the most likely effect on the housing market?

Accepted Answer

Demand for housing increases, shifting the demand curve right, leading to higher prices and higher quantities.

Question 10

If the market price is above the equilibrium price, what will happen over time in a competitive market?

Accepted Answer

A surplus will shrink as sellers lower prices, moving the market toward equilibrium.

Question 11

Suppose the demand for brown eggs is the same as for white eggs, but brown eggs are more expensive to produce. What explains the higher price of brown eggs?

Accepted Answer

Brown eggs have a lower supply curve (higher cost of production).

Question 12

If the price of a good is below equilibrium, which of the following is true?

Accepted Answer

Quantity demanded exceeds quantity supplied, resulting in a shortage.

Question 13

Which of the following best describes the process by which a market returns to equilibrium after a shortage?

Accepted Answer

Buyers compete for the limited good, driving prices up, which increases quantity supplied and decreases quantity demanded until equilibrium is restored.

Question 14

If both the demand and supply curves shift left, what is the certain effect on the market?

Accepted Answer

Equilibrium quantity will fall.

Question 15

In a market, if $$Q_D \u003e Q_S at $$the current price, what must be true?

Accepted Answer

The price is below equilibrium and there is a shortage.

Question 16

Suppose a new environmental regulation causes the demand for oil to decrease. What is the likely effect on the oil market?

Accepted Answer

Equilibrium price and quantity both decrease.

Question 17

If the supply of beer increases at the same time as demand increases (e.g., during a major sports event), what is the most likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price remains relatively stable and quantity increases.

Question 18

Which of the following is the correct formula for calculating a market shortage at a given price?

Accepted Answer

$$	ext{Shortage} = Q_D - Q_S$$

Question 19

If a market is in equilibrium and then demand increases while supply remains unchanged, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity increases.

Question 20

Which of the following statements about competitive equilibrium is correct?

Accepted Answer

At equilibrium, quantity demanded equals quantity supplied.

Supply and Demand in Equilibrium: Microeconomics Study Notes

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