Question 1

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Firms can influence the market price.

Question 2

In a perfectly competitive market, what happens if a seller tries to charge a price above the market price?

Accepted Answer

No one will buy from them.

Question 3

Suppose the supply and demand for oil are given by $S(p) = 50 + 0.5p$ and $D(p) = 130 - 0.5p$. What is the competitive equilibrium price $p^*$?

Accepted Answer

$p^* = 80$

Question 4

Given $S(p) = 50 + 0.5p$ and $D(p) = 130 - 0.5p$, what is the equilibrium quantity $q^*$?

Accepted Answer

$q^* = 90$

Question 5

If the market price is set at $p = 100$ and $S(100) > D(100)$, what will happen in a perfectly competitive market?

Accepted Answer

Sellers will lower their prices to undercut competitors, pushing the price down toward equilibrium.

Question 6

What is the result of excess demand ($D(p) > S(p)$) in a competitive market?

Accepted Answer

Buyers will bid up the price, causing it to rise toward equilibrium.

Question 7

Which equation correctly represents the condition for competitive equilibrium?

Accepted Answer

$S(p^*) = D(p^*)$

Question 8

A leftward shift in the demand curve will result in:

Accepted Answer

A lower equilibrium price and a lower equilibrium quantity.

Question 9

Which of the following would cause a rightward shift in the supply curve?

Accepted Answer

A technological improvement in production.

Question 10

If both supply and demand shift left simultaneously, what is the effect on equilibrium quantity?

Accepted Answer

Equilibrium quantity will fall.

Question 11

Suppose a negative supply shock occurs (leftward shift in supply). What happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price rises, equilibrium quantity falls.

Question 12

Which of the following best describes the role of 'price takers' in a perfectly competitive market?

Accepted Answer

They accept the market price and cannot influence it.

Question 13

If the demand curve shifts right due to increased consumer income, what happens to equilibrium price and quantity?

Accepted Answer

Both equilibrium price and quantity increase.

Question 14

Which of the following is a plausible real-world example of a positive demand shock?

Accepted Answer

A sudden increase in consumer preference for electric cars.

Question 15

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

Accepted Answer

Equilibrium price is uncertain without more information.

Question 16

Which of the following factors would NOT cause a shift in the demand curve?

Accepted Answer

A change in the technology used to produce the good.

Question 17

Suppose the market for crude oil is in equilibrium. If a new oil field is discovered, what is the likely effect on the market?

Accepted Answer

Supply increases, equilibrium price falls, equilibrium quantity rises.

Question 18

In a competitive market, why does excess supply not persist?

Accepted Answer

Sellers lower their prices to sell excess goods, moving the market toward equilibrium.

Question 19

Which of the following best explains why a shortage does not persist in a competitive market?

Accepted Answer

Buyers bid up the price, encouraging more supply and restoring equilibrium.

Competitive Equilibrium in Perfectly Competitive Markets

Study Guide - Practice Questions