Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, where each has a negligible effect on price.

Question 2

According to the law of demand, what happens to the quantity demanded of a good when its price increases, ceteris paribus?

Accepted Answer

Quantity demanded decreases.

Question 3

Suppose the price of AirPods falls. What is the likely effect on the demand curve for music downloads, assuming they are complements?

Accepted Answer

The demand curve for music downloads shifts to the right.

Question 4

If the number of buyers in a market increases, what happens to the demand curve?

Accepted Answer

It shifts to the right.

Question 5

Which of the following is an example of two goods that are substitutes?

Accepted Answer

Tea and coffee

Question 6

What is the effect on the supply curve for oil if the wages of oil rig workers fall?

Accepted Answer

The supply curve shifts to the right.

Question 7

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

Accepted Answer

A decrease in the price of the good.

Question 8

If the equilibrium price in a market is $$3, and the current market price is 5$$, what will happen?

Accepted Answer

There will be a surplus, and price will fall.

Question 9

Given the following demand and supply schedules, at what price is the market in equilibrium?

$$\begin{align*}
	ext{Price} & : \0$$, \$$1, \2$$, \$$3, \4$$, \$$5, \6$$ \
	ext{Quantity Demanded} & : 24, 21, 18, 15, 12, 9, 6 \
	ext{Quantity Supplied} & : 0, 5, 10, 15, 20, 25, 30 
\end{align*}$

Accepted Answer

$$\3$

Question 10

If a new technology reduces the cost of producing electric cars, what happens to the equilibrium price and quantity in the market for electric cars, all else equal?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 11

Suppose the price of gasoline rises and, at the same time, new technology reduces the cost of producing electric cars. What is the likely effect on the equilibrium quantity and price of electric cars?

Accepted Answer

Equilibrium quantity rises, but the effect on price is ambiguous.

Question 12

Which of the following is NOT a non-price determinant of demand?

Accepted Answer

Price of the good itself

Question 13

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

Accepted Answer

Demand for the original good increases.

Question 14

A shortage in a market occurs when:

Accepted Answer

Quantity demanded is greater than quantity supplied.

Question 15

Which of the following steps is NOT part of the three-step process for analyzing changes in equilibrium?

Accepted Answer

Calculate the profit-maximizing output for firms.

Question 16

If the price of a normal good rises, what happens to the quantity demanded, holding all else constant?

Accepted Answer

Quantity demanded decreases.

Question 17

Suppose a fall in the cost of producing tax return preparation software occurs. What happens to the supply curve for this software?

Accepted Answer

It shifts to the right.

Question 18

If professional tax return preparers raise the price of their services, what is the likely effect on the demand for tax return preparation software?

Accepted Answer

Demand for the software increases.

Question 19

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

Accepted Answer

A decrease in the wages of oil rig workers.

Supply and Demand: Foundations of Market Equilibrium

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