Question 1

Which of the following best explains why the demand curve typically has a negative slope?

Accepted Answer

Because of diminishing marginal utility: as consumers consume more, the additional satisfaction from each extra unit decreases.

Question 2

Suppose the price of Pepsi increases. What is the most likely effect on the demand for Coca Cola, assuming they are substitutes?

Accepted Answer

The demand for Coca Cola will increase.

Question 3

If the market price of a good is above the equilibrium price, what will happen in a perfectly competitive market?

Accepted Answer

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

Question 4

Which of the following would cause a movement along the demand curve for ice cream, rather than a shift of the curve?

Accepted Answer

A decrease in the price of ice cream.

Question 5

Consider the following demand function: $$Q_d = 20 - 2P. If $$the price increases from $$P=4 to$$ $$P=6$$, what is the change in quantity demanded?

Accepted Answer

$$Q_d$$ decreases by 4 units.

Question 6

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

Accepted Answer

Firms can set prices above the market equilibrium.

Question 7

If a technological improvement reduces the cost of production for electric cars, what is the expected effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 8

Suppose ramen noodles are considered an inferior good. What happens to the demand for ramen noodles if consumer incomes rise?

Accepted Answer

Demand for ramen noodles decreases.

Question 9

Which of the following scenarios would cause a shift in the supply curve for milk, rather than a movement along the curve?

Accepted Answer

An increase in the cost of cow feed.

Question 10

If the price of gasoline (a complement to cars) increases, what is the expected effect on the demand for cars?

Accepted Answer

Demand for cars decreases.

Question 11

A market is in equilibrium at price $$P^*$$ and quantity $$Q^*. If $$demand increases and supply remains unchanged, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 12

Which of the following best describes the law of supply?

Accepted Answer

As price increases, quantity supplied increases.

Question 13

If the number of buyers in a market increases, what is the expected effect on the market demand curve?

Accepted Answer

The demand curve shifts to the right.

Question 14

Suppose the supply function for a product is $$Q_s = 2P - 4. If $$the market price is $$P=5$$, what is the quantity supplied?

Accepted Answer

$$Q_s = 10$$

Question 15

Which of the following would NOT cause a shift in the demand curve for tennis shoes?

Accepted Answer

A decrease in the price of tennis shoes.

Question 16

If both supply and demand for hybrid cars increase simultaneously, what is the expected effect on equilibrium quantity?

Accepted Answer

Equilibrium quantity will increase.

Question 17

Which of the following is an example of a normal good?

Accepted Answer

Movie tickets

Question 18

If the price of a complement decreases, what happens to the demand for the related good?

Accepted Answer

Demand for the related good increases.

Question 19

Suppose the equilibrium price for a product is $$P^* = 6$$ and the equilibrium quantity is $$Q^* = 12. If a $$government-imposed price ceiling sets the price at $$P = 4$$, what is the most likely market outcome?

Accepted Answer

Excess demand (shortage)

Question 20

Which of the following best describes the concept of market equilibrium?

Accepted Answer

It is the point where quantity demanded equals quantity supplied and there is no tendency for price to change.

Supply, Demand, and Market Equilibrium: Microeconomics Study Notes

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