Question 1

Which of the following best describes what happens at the equilibrium point in a competitive market, as shown in the supply and demand diagram?

Accepted Answer

Quantity demanded equals quantity supplied, and there is no tendency for price to change.

Question 2

Suppose the demand for a good is given by $$ Q_D = 100 - 3P $$ and the supply is given by $$ Q_S = 10 + 2P . $$What is the equilibrium price?

Accepted Answer

$$ P^* = 18 $$

Question 3

If the price of a substitute good increases, what is the likely effect on the demand curve for the original good?

Accepted Answer

The demand curve shifts to the right.

Question 4

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

Accepted Answer

A change in the price of the good itself.

Question 5

At a price of $3.00, the quantity supplied is 30,000 units per year and the quantity demanded is 10,000 units per year. What is the market condition at this price?

Accepted Answer

There is a surplus of 20,000 units.

Question 6

If both demand and supply increase simultaneously, what can we say about the new equilibrium?

Accepted Answer

Equilibrium quantity will rise, but the effect on equilibrium price is ambiguous.

Question 7

Which of the following best illustrates the law of demand?

Accepted Answer

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

Question 8

Given the supply equation $$ Q_S = 10 + 2P $$, what is the quantity supplied when the price is $$ P = 5 $$?

Accepted Answer

$$ Q_S = 30 $$

Question 9

Which of the following events would cause the supply curve for cars to shift to the right?

Accepted Answer

A technological improvement in car manufacturing.

Question 10

If the government imposes a tax on producers, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 11

Suppose the demand for a good increases due to higher consumer incomes (assuming the good is normal). What happens to equilibrium price and quantity?

Accepted Answer

Both equilibrium price and quantity increase.

Question 12

Which of the following statements is correct regarding a shortage in the market?

Accepted Answer

A shortage occurs when quantity demanded exceeds quantity supplied at a given price.

Question 13

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

Accepted Answer

The demand curve shifts to the right.

Question 14

Given the demand equation $$ Q_D = 100 - 3P $$, what is the quantity demanded when the price is $$ P = 10 $$?

Accepted Answer

$$ Q_D = 70 $$

Question 15

Which of the following is NOT a determinant of supply?

Accepted Answer

Consumer income.

Question 16

If the market price is below the equilibrium price, what will happen in the market?

Accepted Answer

There will be a shortage, putting upward pressure on the price.

Question 17

Which of the following best describes ceteris paribus in the context of demand and supply analysis?

Accepted Answer

Holding all other variables constant except the one being studied.

Question 18

A decrease in the price of an input used in production will have what effect on the supply curve?

Accepted Answer

Shift the supply curve to the right.

Question 19

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

Accepted Answer

The demand curve shifts to the right.

Question 20

Suppose $$ Q_D = 100 - 3P $$ and $$ Q_S = 10 + 2P . $$What is the equilibrium quantity?

Accepted Answer

$$ Q^* = 46 $$

Demand, Supply, and Price: Foundations of Market Equilibrium

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