Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded of the good decreases, ceteris paribus.

Question 2

Suppose the demand for new cars increases as consumer incomes rise. What type of good are new cars?

Accepted Answer

Normal good

Question 3

If the price of athletic shoes falls from $$150 to 125$$, and the quantity demanded increases from 8 to 9 million pairs per week, which effect is primarily responsible for this change?

Accepted Answer

Both the income and substitution effects

Question 4

Which of the following would cause a shift to the right in the demand curve for sugary breakfast cereal?

Accepted Answer

A successful advertising campaign that makes sugary cereal more popular

Question 5

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

Accepted Answer

The demand for the original good increases

Question 6

Which of the following is most likely to cause a leftward shift in the supply curve for athletic shoes?

Accepted Answer

A natural disaster that disrupts production

Question 7

Suppose the supply curve for a product shifts to the right. What is the most likely effect on equilibrium price and quantity, holding demand constant?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases

Question 8

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

Accepted Answer

A surplus

Question 9

Given the following demand and supply equations, find the equilibrium price: $$Q_D = 100 - 2P$$, $$Q_S = 20 + 3P.$$

Accepted Answer

$$P = 16$$

Question 10

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

Accepted Answer

A change in the price of gasoline

Question 11

If a firm expects the price of its product to rise in the future, what is it likely to do with its current supply?

Accepted Answer

Decrease current supply

Question 12

Which of the following best explains why the market demand curve is flatter than individual demand curves?

Accepted Answer

Market demand is the sum of all individual demands at each price.

Question 13

Suppose a new machine allows athletic shoes to be produced with half the labor. What happens to the supply curve?

Accepted Answer

It shifts to the right

Question 14

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

Accepted Answer

Demand decreases

Question 15

Which of the following is an example of an inferior good?

Accepted Answer

Second-hand clothes

Question 16

A pandemic causes consumers to buy more hand sanitizer. Which variable is most directly responsible for this shift?

Accepted Answer

Change in tastes

Question 17

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

Accepted Answer

It will increase

Question 18

Suppose the supply of a product decreases while demand remains unchanged. What happens to equilibrium price and quantity?

Accepted Answer

Price increases, quantity decreases

Question 19

Which of the following is the correct method to find the market equilibrium given $$Q_D = 50 - P$$ and $$Q_S = 2P$$?

Accepted Answer

Set $$Q_D = Q_S$$ and solve for $$P$$

Question 20

A decrease in the price of an input used to make athletic shoes will have what effect on the supply curve?

Accepted Answer

Shift the supply curve to the right

Supply, Demand, and Market Equilibrium: Microeconomics Study Notes

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