Question 1

Which of the following best explains why the demand curve for most goods is downward sloping?

Accepted Answer

Because as the price of a good rises, the quantity demanded falls due to the substitution and income effects.

Question 2

Suppose the price of coffee increases. According to the law of demand, what will happen to the quantity demanded of coffee, ceteris paribus?

Accepted Answer

It will decrease.

Question 3

Which of the following is an example of a factor that would shift the demand curve for cars to the right?

Accepted Answer

An increase in consumer incomes, assuming cars are a normal good.

Question 4

If the price of soybeans rises, what is the likely effect on the supply of corn, assuming farmers can grow either crop?

Accepted Answer

The supply of corn will decrease.

Question 5

Which equation represents the condition for market equilibrium?

Accepted Answer

$$Q_d = Q_s$$

Question 6

A technological advancement in the production of smartphones will likely have which effect on the market?

Accepted Answer

Shift the supply curve to the right, decreasing equilibrium price and increasing equilibrium quantity.

Question 7

If a hurricane destroys a large portion of orange crops in Florida, what is the most likely immediate effect on the orange market?

Accepted Answer

Supply decreases, price rises.

Question 8

Which of the following scenarios would result in a surplus in the market for bread?

Accepted Answer

The price of bread is set above the equilibrium price.

Question 9

If both the demand and supply for laptops increase simultaneously, what can we say about the equilibrium quantity and price?

Accepted Answer

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

Question 10

A Giffen good is characterized by which of the following?

Accepted Answer

An upward-sloping demand curve due to strong income effects for an inferior good.

Question 11

Suppose the government imposes a price ceiling below the equilibrium price on rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 12

Which of the following would NOT shift the supply curve for wheat?

Accepted Answer

A change in the price of wheat.

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

Which of the following best describes the income effect?

Accepted Answer

When the price of a good rises, consumers feel poorer and buy less of all goods.

Question 15

Suppose the equilibrium price of energy bars is $$1.50 and the equilibrium quantity is 10 million bars per week. If the government sets a price floor at 2.00$$, what will happen?

Accepted Answer

There will be a surplus of energy bars.

Question 16

If the expected future price of a good increases, what is the likely effect on current supply?

Accepted Answer

Current supply decreases.

Question 17

Which of the following is a real-world example of a price control discussed in the study materials?

Accepted Answer

Rent control in housing markets.

Question 18

If the population of a city increases, what is the likely effect on the market for pizza in that city, ceteris paribus?

Accepted Answer

The demand curve for pizza shifts to the right.

Question 19

Which of the following statements about minimum wage is supported by the Card and Krueger (1990) study?

Accepted Answer

An increase in the minimum wage led to an increase in employment at fast-food restaurants.

Supply and Demand: Foundations of Market Economics

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