Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the price of Netflix subscriptions falls. What is the most likely effect on the market for 36-inch televisions, assuming they are complements?

Accepted Answer

The demand curve for televisions shifts to the right, leading to a higher equilibrium price and quantity.

Question 3

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

Accepted Answer

A decrease in the price of televisions.

Question 4

If the government increases income taxes, what is the most likely effect on the equilibrium price and quantity in the market for normal goods?

Accepted Answer

Equilibrium price decreases and equilibrium quantity decreases.

Question 5

Which equation represents the condition for market equilibrium?

Accepted Answer

$Q_d = Q_s$

Question 6

A new technology reduces the cost of producing televisions. What is the most likely effect on the market?

Accepted Answer

The supply curve shifts to the right, leading to a lower equilibrium price and higher equilibrium quantity.

Question 7

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

Accepted Answer

The demand for the original good increases.

Question 8

Which of the following is NOT a determinant of demand?

Accepted Answer

Cost of production inputs.

Question 9

A market is in equilibrium at price $P^*$ and quantity $Q^*$. If there is an exogenous shock that increases the cost of materials, what is the most likely outcome?

Accepted Answer

The supply curve shifts left, leading to a higher equilibrium price and lower equilibrium quantity.

Question 10

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the combination of goods most desired by society.

Question 11

If the population increases, what is the most likely effect on the market for a normal good?

Accepted Answer

The demand curve shifts to the right, increasing equilibrium price and quantity.

Question 12

Which of the following is an example of a shift in the supply curve?

Accepted Answer

An increase in the number of sellers.

Question 13

Suppose the market for wheat is in equilibrium. If a drought destroys a large portion of the wheat crop, what will happen?

Accepted Answer

The supply curve shifts left, leading to a higher equilibrium price and lower equilibrium quantity.

Question 14

Which of the following best describes a competitive equilibrium?

Accepted Answer

A situation where no buyer or seller can influence the market price.

Question 15

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

Accepted Answer

The demand for the original good decreases.

Question 16

Which of the following is the best example of productive efficiency?

Accepted Answer

A firm produces at the lowest point on its average cost curve.

Question 17

If expected future prices of a good increase, what is the likely effect on current demand?

Accepted Answer

Current demand increases.

Question 18

Which of the following is a real-world example of a supply shock?

Accepted Answer

A sudden increase in oil prices due to geopolitical conflict.

Question 19

Suppose the demand for a product is given by $Q_d = 30 - 2P$ and the supply is $Q_s = 4P$. What is the equilibrium price?

Accepted Answer

$P = 4$

Question 20

Which of the following best explains why equilibrium is important in microeconomics?

Accepted Answer

It allows us to predict how markets will respond to changes in external conditions.

Demand, Supply, and Market Equilibrium: Microeconomics Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards