Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with identical products, many buyers and sellers, and no barriers to entry.

Question 2

According to the Law of Demand, what happens to quantity demanded when the price of a good increases, ceteris paribus?

Accepted Answer

Quantity demanded decreases.

Question 3

If the number of consumers in a market doubles, what is the most likely effect on the demand curve for a normal good?

Accepted Answer

The demand curve shifts to the right.

Question 4

Which of the following events would cause a shift in the demand curve for smartphones?

Accepted Answer

An increase in consumer income, assuming smartphones are a normal good.

Question 5

Suppose instant noodles are an inferior good. What happens to the demand for instant noodles if consumer incomes rise?

Accepted Answer

Demand shifts to the left.

Question 6

If the price of peanut butter increases, what is the likely effect on the demand for jelly, a complementary good?

Accepted Answer

Demand for jelly decreases.

Question 7

A new technology makes it cheaper to produce smartphones. What happens to the supply curve for smartphones?

Accepted Answer

The supply curve shifts to the right.

Question 8

If the government increases subsidies for corn farmers, what is the expected effect on the market for corn?

Accepted Answer

Supply shifts to the right.

Question 9

Which of the following will NOT shift the demand curve for ice cream?

Accepted Answer

A change in the price of ice cream.

Question 10

If the price of wheat, a substitute in production for corn, decreases, what happens in the market for corn?

Accepted Answer

Supply shifts to the right.

Question 11

Suppose a new law increases the minimum wage for workers in the pizza industry. What is the likely effect on the supply of pizza?

Accepted Answer

Supply shifts to the left.

Question 12

If consumers expect the price of televisions to fall during Black Friday sales next week, what happens to the demand for televisions today?

Accepted Answer

Demand shifts to the left.

Question 13

Which equation best represents the market equilibrium condition?

Accepted Answer

$$ Q_D = Q_S $$

Question 14

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

Accepted Answer

A surplus.

Question 15

Which of the following scenarios would lead to an increase in the equilibrium price and a decrease in the equilibrium quantity of carrots?

Accepted Answer

An increase in the price of fertilizer, an input for carrots.

Question 16

If both the supply and demand for a good increase, what can be said about the new equilibrium?

Accepted Answer

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

Question 17

Which of the following best describes the effect of a tax increase on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 18

If the price of a substitute in production rises, what happens to the supply of the original good?

Accepted Answer

Supply of the original good decreases.

Question 19

A positive event in nature, such as ideal weather for wheat farming, will have what effect on the supply of wheat?

Accepted Answer

Supply increases (shifts right).

Question 20

If the price of a good changes, what happens on the demand curve?

Accepted Answer

There is movement along the demand curve.

Supply and Demand: The Interaction of Demand and Supply in Perfectly Competitive Markets

Study Guide - Practice Questions