Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where all sellers sell identical goods and no individual buyer or seller can influence the market price.

Question 2

According to the law of demand, what happens to the quantity demanded of gasoline if the price decreases, holding all else equal?

Accepted Answer

The quantity demanded increases.

Question 3

Which of the following would cause a shift in the demand curve for a normal good to the right?

Accepted Answer

An increase in consumer income.

Question 4

Suppose the price of coffee increases. What is likely to happen to the demand for tea, assuming tea is a substitute for coffee?

Accepted Answer

The demand for tea will increase.

Question 5

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

Accepted Answer

A change in the product’s own price.

Question 6

If a new technology reduces the cost of producing smartphones, what will happen to the supply curve for smartphones?

Accepted Answer

It will shift to the right.

Question 7

Which of the following equations represents the condition for competitive equilibrium in a market?

Accepted Answer

$$Q_d = Q_s$$

Question 8

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

Accepted Answer

Excess demand (shortage) of gasoline.

Question 9

Which of the following would cause a leftward shift in the supply curve for oil?

Accepted Answer

A major oil exporter ceasing production.

Question 10

If both the demand curve and the supply curve for a good shift to the right, what can we say about the equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 11

Suppose the price of gasoline rises from $$2.40 to 6.46 $$per gallon as you move from the United States to the Netherlands. According to the law of demand, what happens to your quantity demanded?

Accepted Answer

It decreases.

Question 12

Which of the following is an example of a shift in the demand curve for gasoline?

Accepted Answer

A new preference for road trips among consumers.

Question 13

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

Accepted Answer

It shifts to the left.

Question 14

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 15

If a new government policy increases the price of gasoline through taxation, what is the expected effect on the quantity of gasoline demanded?

Accepted Answer

Quantity demanded will decrease.

Question 16

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

Accepted Answer

Buyers’ expectations about the future.

Question 17

Suppose a new technology makes it easier to access oil reserves, while at the same time, environmental concerns reduce demand for oil. What is the likely effect on equilibrium price?

Accepted Answer

Equilibrium price will definitely decrease.

Question 18

Which of the following best describes excess supply?

Accepted Answer

When quantity supplied exceeds quantity demanded at a given price.

Question 19

If the price of a complement good increases, what happens to the demand for the original good?

Accepted Answer

Demand for the original good decreases.

Question 20

Which of the following scenarios would result in a movement along the supply curve for roses?

Accepted Answer

A change in the price of roses.

Demand, Supply, and Equilibrium: Foundations of Market Analysis

Study Guide - Practice Questions

Study Guide - Flashcards