Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and sellers, so that no single buyer or seller can influence the price.

Question 2

If the money price of a pound of turkey is $4 and the money price of a pound of steak is $8, what is the relative price of turkey in terms of steak?

Accepted Answer

$0.50$

Question 3

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

Accepted Answer

The quantity demanded decreases.

Question 4

Which of the following is an example of a public good?

Accepted Answer

National defense

Question 5

Suppose the demand for ice cream is given by $Q_d = 100 - 10P$ and the supply is $Q_s = 20P$. What is the equilibrium price?

Accepted Answer

$P = 3.33$

Question 6

Which of the following would cause a movement along the demand curve for pizza, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of pizza.

Question 7

If the price of a complement in consumption (e.g., hot dog buns) increases, what happens to the demand for hot dogs?

Accepted Answer

The demand for hot dogs decreases.

Question 8

Which of the following is a non-price determinant (shift factor) of supply?

Accepted Answer

A change in technology

Question 9

Suppose the price of seed doubles in the corn market. What is the most likely effect on the equilibrium price and quantity of corn?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 10

If a good is both rival and excludable in consumption, it is classified as:

Accepted Answer

A private good

Question 11

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

Accepted Answer

An increase in consumers' expected future income

Question 12

If the supply curve for a good shifts to the left, which of the following could be a possible cause?

Accepted Answer

An increase in the price of an input used to produce the good

Question 13

Suppose the demand for ramen noodles decreases as consumer incomes rise. Ramen noodles are therefore:

Accepted Answer

An inferior good

Question 14

If the price of a substitute in production falls, what happens to the supply of the good being considered?

Accepted Answer

The supply increases.

Question 15

Given the demand equation $Q_d = 1000 - 20P$ and the supply equation $Q_s = 5P$, what is the equilibrium quantity?

Accepted Answer

$Q = 500$

Question 16

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

Accepted Answer

Because of the income and substitution effects as price changes.

Question 17

If the number of sellers in a market increases significantly, what happens to the supply curve?

Accepted Answer

It shifts to the right.

Question 18

A shortage in a market occurs when:

Accepted Answer

Quantity demanded exceeds quantity supplied at the current price.

Question 19

Which of the following is true about the minimum-supply-price curve?

Accepted Answer

It shows the lowest price a producer must receive to produce a particular amount of output.

Question 20

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

Accepted Answer

Current supply decreases.

Chapter 3: Demand and Supply – Microeconomics Study Notes

Study Guide - Practice Questions