Question 1

Suppose the demand function for a product is given by $Q_D = 10 - 0.5P$ and the supply function is $Q_S = 5 + P$. What is the equilibrium price ($P^*$) and equilibrium quantity ($Q^*$)?

Accepted Answer

$P^* = 10, \ Q^* = 5$

Question 2

If the price of electric vehicle (EV) charging falls, what is the most likely effect on the demand for EVs, holding all else constant?

Accepted Answer

The demand for EVs will increase, shifting the demand curve to the right.

Question 3

Which of the following best describes the law of demand?

Accepted Answer

There is an inverse relationship between price and quantity demanded, holding non-price determinants constant.

Question 4

If the price of gas-powered SUVs falls and GM produces both SUVs and EVs using the same inputs, what is the likely effect on the supply of EVs?

Accepted Answer

The supply of EVs will decrease, shifting the supply curve to the left.

Question 5

Given the demand function $P = 20 - 2Q$ and the supply function $P = 5 + Q$, if the market price is $14$, what will happen in the market?

Accepted Answer

There will be excess demand, causing the price to rise.

Question 6

Which of the following is a non-price determinant of demand?

Accepted Answer

Consumer preferences

Question 7

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

Accepted Answer

The supply curve will shift to the right.

Question 8

Suppose the cost of battery production for EVs decreases significantly. What is the most likely effect on the equilibrium price and quantity of EVs?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 9

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

Accepted Answer

A decrease in the price of the product itself.

Question 10

If Good A and Good B are complements in consumption, what happens to the equilibrium price and quantity of Good B when the price of Good A increases?

Accepted Answer

Both the equilibrium price and equilibrium quantity of Good B will decrease.

Question 11

Which of the following best describes market equilibrium?

Accepted Answer

The quantity demanded equals the quantity supplied, and there is no pressure for the price to change.

Question 12

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

Accepted Answer

The demand for the original good will increase.

Question 13

Suppose the government imposes a 25% tariff on semiconductors, a key input for EV production. What is the most likely effect on the supply of EVs?

Accepted Answer

The supply of EVs will decrease, shifting the supply curve to the left.

Question 14

Which of the following is an example of comparative statics analysis?

Accepted Answer

Studying how a decrease in consumer income affects the equilibrium price and quantity of a normal good.

Question 15

If both the demand and supply curves for a product shift to the right at the same time, what can we predict about the new equilibrium?

Accepted Answer

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

Question 16

Which of the following would cause a leftward shift in the supply curve for a product?

Accepted Answer

An increase in production costs.

Question 17

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

Accepted Answer

There will be a surplus, and the price will tend to fall toward equilibrium.

Question 18

Which of the following best describes a movement along the supply curve?

Accepted Answer

A change in the price of the good itself, holding non-price determinants constant.

Question 19

If Good A and Good B are substitutes in production, what happens to the supply of Good B when the price of Good A increases?

Accepted Answer

The supply of Good B will decrease.

Question 20

Suppose the demand for EVs increases due to a shift in consumer preferences toward sustainability. What is the likely effect on the equilibrium price and quantity of EVs?

Accepted Answer

Both equilibrium price and equilibrium quantity will increase.

Market Foundations: Demand, Supply, Equilibrium, and Comparative Statics

Study Guide - Practice Questions

Study Guide - Flashcards