Question 1

According to the law of supply, what happens to the quantity supplied of a good when its price increases, all else equal?

Accepted Answer

The quantity supplied increases.

Question 2

Refer to the table: If the price of energy bars is $1.50 per bar, what is the equilibrium quantity in the market?

Accepted Answer

$$10$$ million bars per week

Question 3

Which of the following best describes what happens when the market price is set above the equilibrium price?

Accepted Answer

A surplus occurs, causing the price to fall.

Question 4

Suppose the demand curve for a good shifts rightward. Which of the following could explain this shift?

Accepted Answer

An increase in population.

Question 5

Given the supply equation $$P = 0.25Q + 0.5$$, what is the quantity supplied when the price is $$2.50$$?

Accepted Answer

$$8$$ million bars per week

Question 6

If the price of energy bars rises from $$1.00 to$$ $$2.00$$ per bar, what happens to the quantity supplied, according to the table?

Accepted Answer

It increases from $$6 to$$ $$13$$ million bars per week.

Question 7

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

Accepted Answer

A change in the price of the good itself.

Question 8

If the demand for energy bars increases while the supply remains unchanged, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price rises, equilibrium quantity rises.

Question 9

Suppose the demand curve for pizza shifts from $$D_1 to$$ $$D_2 as $$shown in the graph. Which of the following could cause this shift?

Accepted Answer

A decrease in the price of a substitute good.

Question 10

If the market for energy bars is in equilibrium and the price of a substitute good increases, what is likely to happen?

Accepted Answer

The demand for energy bars will increase.

Question 11

Given the demand equation $$Q_d = 700 - 20P$$ and the supply equation $$Q_s = 300 + 20P$$, what is the equilibrium price?

Accepted Answer

$$P = 10$$

Question 12

If the price of energy bars is set at $$0.50$$ per bar, what will occur in the market according to the table?

Accepted Answer

A shortage of $$16$$ million bars per week.

Question 13

Which of the following best describes the effect of an increase in the cost of machinery used to produce a good?

Accepted Answer

The supply curve shifts leftward.

Question 14

If both demand and supply increase simultaneously, what can be said about the equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 15

Which of the following statements is TRUE about market equilibrium?

Accepted Answer

At equilibrium, quantity demanded equals quantity supplied.

Question 16

If the price of a normal good increases, what happens to the quantity demanded and why?

Accepted Answer

Quantity demanded decreases due to the income and substitution effects.

Question 17

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

Accepted Answer

An increase in the price of the good itself.

Question 18

Suppose the equilibrium price of a good is $$4. If $$the market price is set at $$2$$, what will happen?

Accepted Answer

There will be a shortage, and the price will rise.

Question 19

If a new technology reduces the cost of producing energy bars, what is the likely effect on the market?

Accepted Answer

The supply curve shifts rightward, lowering the equilibrium price.

Question 20

Which of the following is a correct statement about the law of demand?

Accepted Answer

As the price of a good falls, the quantity demanded increases.

Demand and Supply: Foundations of Market Equilibrium

Study Guide - Practice Questions