Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, identical products, and no barriers to entry.

Question 2

Suppose the price of coffee increases. According to the substitution effect, what is likely to happen to the quantity demanded of tea, assuming tea is a substitute for coffee?

Accepted Answer

The quantity demanded of tea will increase.

Question 3

If the demand curve for a product shifts to the right, which of the following could be a possible cause?

Accepted Answer

An increase in consumer income for a normal good.

Question 4

Which equation represents market equilibrium in a perfectly competitive market?

Accepted Answer

$$ Q_d = Q_s $$

Question 5

A supply curve shows the relationship between:

Accepted Answer

The price of a product and the quantity of the product supplied.

Question 6

If the price of a product falls, what does the law of supply predict will happen to the quantity supplied?

Accepted Answer

The quantity supplied will decrease.

Question 7

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

Accepted Answer

Barriers to entry.

Question 8

If the market supply for a product increases while demand remains constant, what is the likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price will fall and equilibrium quantity will rise.

Question 9

Which of the following best describes complements?

Accepted Answer

Goods and services that go together.

Question 10

A demand schedule is:

Accepted Answer

A table showing the relationship between the price of a product and the quantity demanded.

Question 11

If the price of a product rises, what does the law of demand predict will happen to the quantity demanded?

Accepted Answer

The quantity demanded will decrease.

Question 12

Which of the following scenarios best illustrates the concept of market equilibrium?

Accepted Answer

At a local farmers market, the amount of apples buyers want to purchase at $2 per pound exactly matches the amount sellers are willing to sell at that price.

Question 13

Which of the following is the best example of substitutes?

Accepted Answer

Coffee and tea.

Question 14

If a consumer's purchasing power increases due to a decrease in the price of a good, which effect is being described?

Accepted Answer

Income effect.

Question 15

Suppose the supply curve for a product shifts to the left. What is the most likely cause?

Accepted Answer

A decrease in the number of suppliers.

Question 16

Which formula represents the law of supply?

Accepted Answer

$$ \Delta P \uparrow \Rightarrow \Delta Q_s \uparrow $$

Question 17

Which of the following statements is true regarding market demand?

Accepted Answer

It is the sum of all the consumers of a given good or service.

Question 18

A supply schedule is:

Accepted Answer

A table showing the relationship between the price of a product and the quantity supplied.

Question 19

If the price of gasoline increases, what is likely to happen to the quantity demanded of cars that use a lot of gasoline, assuming all else is constant?

Accepted Answer

The quantity demanded of such cars will decrease.

Question 20

Which of the following best describes quantity supplied?

Accepted Answer

The amount of a good or service a firm is willing and able to supply at a given price.

Fundamental Concepts in Microeconomics: Market Structures, Demand, and Supply

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