Question 1

Which of the following best describes the equilibrium point in the supply and demand graph?

Accepted Answer

The point where the supply and demand curves intersect.

Question 2

If the market price is set above the equilibrium price, what is the most likely outcome?

Accepted Answer

A surplus will occur because quantity supplied exceeds quantity demanded.

Question 3

Suppose the government sets a price ceiling below the equilibrium price. What is the likely result?

Accepted Answer

A shortage, because consumers will demand more than suppliers are willing to provide.

Question 4

Which area on the supply and demand graph represents a shortage?

Accepted Answer

Where the demand curve is above the supply curve.

Question 5

If the demand for a product increases while supply remains constant, what will happen to the equilibrium price and quantity?

Accepted Answer

Both equilibrium price and equilibrium quantity will increase.

Question 6

Given the supply function $$Q_s = 10 + 2P$$ and the demand function $$Q_d = 50 - 3P$$, what is the equilibrium price?

Accepted Answer

$$P = 8$$

Question 7

Which of the following would cause a shift to the right in the demand curve?

Accepted Answer

An increase in the price of a substitute good.

Question 8

If a technological advancement reduces production costs, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 9

At a price of $$P = 2$$, the quantity supplied is 20 and the quantity demanded is 40. What is the market condition?

Accepted Answer

Shortage of 20 units.

Question 10

Which of the following best explains why a surplus occurs in a market?

Accepted Answer

The price is set above the equilibrium price.

Question 11

If the government imposes a price floor above the equilibrium price, what will happen?

Accepted Answer

A surplus will occur.

Question 12

Which of the following is the correct formula for market equilibrium?

Accepted Answer

$$Q_s = Q_d$$

Question 13

If the supply curve shifts to the left and the demand curve remains unchanged, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 14

A decrease in the price of a complementary good will have what effect on the demand curve for the original good?

Accepted Answer

Shift the demand curve to the right.

Question 15

If the demand function is $$Q_d = 60 - 4P$$ and the supply function is $$Q_s = 20 + 2P$$, what is the equilibrium quantity?

Accepted Answer

$$Q = 50$$

Supply and Demand: Foundations of the Goods Market

Study Guide - Practice Questions