Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

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

Question 2

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

Accepted Answer

The quantity demanded decreases.

Question 3

Suppose the price of coffee increases. According to the substitution effect, what is likely to happen?

Accepted Answer

Consumers will buy more tea, a substitute for coffee.

Question 4

Which of the following would cause a movement along the demand curve for pizza?

Accepted Answer

A decrease in the price of pizza.

Question 5

If ramen noodles are considered an inferior good, what happens to the demand for ramen when consumer incomes rise?

Accepted Answer

Demand for ramen decreases.

Question 6

Which of the following would shift the demand curve for smartphones to the right?

Accepted Answer

An increase in the population of young adults.

Question 7

If the price of a complement good (such as printers for computers) increases, what is the likely effect on the demand for computers?

Accepted Answer

The demand for computers decreases.

Question 8

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

Accepted Answer

A technological advancement in battery production.

Question 9

Suppose a new tax is imposed on the production of soft drinks. What is the most likely effect on the supply curve for soft drinks?

Accepted Answer

The supply curve shifts to the left.

Question 10

If firms expect the price of their product to rise in the future, what is the likely effect on current supply?

Accepted Answer

Current supply decreases.

Question 11

Market equilibrium occurs when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 12

If the supply of oranges increases while demand remains constant, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 13

Suppose both the demand and supply for laptops increase simultaneously. What can we say about the new equilibrium?

Accepted Answer

Equilibrium quantity increases, but the effect on equilibrium price is indeterminate.

Question 14

Which of the following best illustrates the invisible hand principle?

Accepted Answer

Individuals pursuing their own interests unintentionally promote society's economic well-being.

Question 15

If the price elasticity of demand for a product is greater than 1, the demand is considered:

Accepted Answer

Elastic

Question 16

Which of the following is an example of a change in quantity supplied, not a change in supply?

Accepted Answer

A decrease in the price of wheat causes farmers to supply less wheat.

Question 17

Suppose the government imposes a price ceiling below the equilibrium price for rental apartments. What is the likely result?

Accepted Answer

A shortage of rental apartments.

Question 18

Which of the following equations represents market equilibrium?

Accepted Answer

$Q_d = Q_s$

Question 19

If a hurricane destroys a large portion of the orange crop in Florida, what is the likely effect on the supply curve for oranges?

Accepted Answer

The supply curve shifts to the left.

Question 20

Which of the following best describes economic efficiency in a market?

Accepted Answer

All potential gains from trade have been realized.

Supply, Demand, and the Market Process: Study Notes

Study Guide - Practice Questions