Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where all sellers offer identical goods and no individual buyer or seller can affect the market price.

Question 2

Suppose the demand for gasoline is given by $$Q_d = 350 - 50P. $$What is the inverse demand function?

Accepted Answer

$$P = 7 - Q_d / 50$$

Question 3

Which of the following would cause a rightward shift in the demand curve for local tomatoes?

Accepted Answer

An increase in the number of buyers at the market.

Question 4

If the supply of brown eggs is more expensive to produce than white eggs, what happens to the equilibrium price of brown eggs compared to white eggs, all else equal?

Accepted Answer

The equilibrium price of brown eggs will be higher.

Question 5

Which of the following is the only reason for a movement along the demand curve for a good?

Accepted Answer

A change in the price of the good itself.

Question 6

Given the supply function $$Q_s = -2 + 1P$$ and the demand function $$Q_d = 10 - 1P$$, what is the equilibrium price and quantity?

Accepted Answer

$$P = 6, Q = 4$$

Question 7

If a new technology reduces the cost of oil extraction, what happens to the supply curve for oil?

Accepted Answer

It shifts to the right.

Question 8

During a drought, the price of ground beef rises and the quantity demanded falls. Which economic principle does this illustrate?

Accepted Answer

Law of Demand

Question 9

If the price of roses increases sharply before Valentine’s Day, which of the following best explains this phenomenon?

Accepted Answer

A rightward shift in the demand curve for roses.

Question 10

Suppose the demand for masks triples, changing from $$Q_d = 20 - 2P to$$ $$Q_d = 60 - 6P$$, while supply remains $$Q_s = 2P. $$What is the new equilibrium price and quantity?

Accepted Answer

$$P = 8, Q = 16$$

Question 11

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

Accepted Answer

A change in the price of used cars.

Question 12

If the market price is above the competitive equilibrium price, what will result?

Accepted Answer

Excess supply (surplus)

Question 13

Which of the following is an example of a complement to gasoline?

Accepted Answer

Gasoline-powered cars

Question 14

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

It increases.

Question 15

A market is defined as:

Accepted Answer

A group of economic agents trading a good or service plus the rules and arrangements for trading.

Question 16

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

Accepted Answer

It must increase.

Question 17

Which of the following best explains why the price of beer does NOT increase right before Super Bowl Sunday, even though demand increases?

Accepted Answer

The supply curve for beer shifts right at the same time as demand.

Question 18

Suppose a new law prevents prices from rising in a market where demand increases. What is the likely result?

Accepted Answer

A shortage will occur (excess demand).

Question 19

If the demand for a life-saving operation is perfectly inelastic, what does the demand curve look like?

Accepted Answer

A vertical line.

Question 20

Which of the following is NOT a determinant of market demand?

Accepted Answer

Input prices

Supply, Demand, and Competitive Equilibrium: Foundations of Microeconomics

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