Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where buyers and sellers trade identical goods and no individual can influence the market price.

Question 2

Suppose the price of gasoline decreases from $3.00 to $2.00 per gallon. According to the law of demand, what will happen to the quantity demanded?

Accepted Answer

The quantity demanded will increase.

Question 3

Which of the following would cause a shift of the demand curve for oil to the left?

Accepted Answer

Rising environmental concerns and adoption of energy-saving technologies.

Question 4

If the government sets a price ceiling on gasoline below the equilibrium price, what is the most likely outcome?

Accepted Answer

Excess demand (shortage) of gasoline.

Question 5

Which of the following is NOT a factor that shifts the supply curve?

Accepted Answer

A change in the product's own price.

Question 6

Consider the market for roses before Valentine’s Day. What explains the increase in price?

Accepted Answer

A rightward shift in the demand curve.

Question 7

If both the demand curve and the supply curve for beer shift right before Super Bowl Sunday, what is the likely effect on equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases, but the effect on price is ambiguous.

Question 8

Which equation represents the condition for competitive equilibrium in a market?

Accepted Answer

$ Q_d = Q_s $

Question 9

A new technology makes it easier to extract oil. What happens to the supply curve and equilibrium price?

Accepted Answer

Supply curve shifts right, equilibrium price falls.

Question 10

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 11

Which of the following scenarios is an example of a movement along the demand curve?

Accepted Answer

The price of the good itself decreases.

Question 12

Suppose the government subsidizes gasoline, lowering its price from $2.40 to $0.27 per gallon. What happens to the quantity demanded?

Accepted Answer

It increases.

Question 13

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

Accepted Answer

It shifts to the right.

Question 14

Which of the following is a reason for a movement along the supply curve?

Accepted Answer

A change in the product's own price.

Question 15

If both the demand curve shifts left and the supply curve shifts right, what is the likely effect on equilibrium price?

Accepted Answer

Equilibrium price decreases.

Question 16

Which of the following best explains why brown eggs typically cost more than white eggs?

Accepted Answer

Brown eggs are more expensive to produce.

Question 17

Suppose you start rock climbing and take more road trips, increasing your annual gasoline consumption at the same price. Is this a movement along your demand curve or a shift?

Accepted Answer

A shift of the demand curve to the right.

Question 18

If the price of input used to produce a good increases, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 19

Which of the following is true about market equilibrium?

Accepted Answer

It occurs when $ Q_d = Q_s $ and there is no tendency for price to change.

Question 20

If the government heavily taxes gasoline, raising its price from $0.27 to $6.48 per gallon, what happens to the quantity demanded?

Accepted Answer

It decreases.

Chapter 4: Demand, Supply, and Equilibrium – Microeconomics Study Notes

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