Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

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

Question 2

Suppose the demand for a product is given by $Q_D = 350 - 50P$ and the supply is $Q_S = -50 + 50P$. What is the equilibrium price and quantity?

Question 3

If the price of a good increases, what happens according to the law of demand?

Accepted Answer

The quantity demanded decreases.

Question 4

Which of the following would cause a shift in the demand curve for gasoline?

Accepted Answer

An increase in consumer income.

Question 5

Brown eggs tend to cost more than white eggs primarily because:

Accepted Answer

Brown eggs are more expensive to produce due to hens eating more food.

Question 6

Which of the following is NOT a reason for a movement along the demand curve?

Accepted Answer

A change in consumer income.

Question 7

If the supply curve for roses shifts left just before Valentine's Day, what is the most likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 8

Given the demand function $Q_D = 20 - 2P$ and the supply function $Q_S = 2P$, what is the equilibrium price and quantity?

Accepted Answer

Equilibrium price $P^* = 5$, equilibrium quantity $Q^* = 10$

Question 9

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

Accepted Answer

A technological advancement such as fracking.

Question 10

If both the demand and supply curves for a product shift right, what happens to the equilibrium quantity?

Accepted Answer

It increases.

Question 11

What is excess supply in a market?

Accepted Answer

When suppliers provide more than consumers want at a given price.

Question 12

Suppose a drought causes a decrease in the supply of ground beef. What is the most likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 13

If the market for masks has demand $Q_D = 20 - 2P$ and supply $Q_S = 2P$, and demand triples, what is the new demand function?

Accepted Answer

$Q_D = 60 - 6P$

Question 14

Which of the following is a real-world example of a market where the equilibrium price can be negative?

Accepted Answer

The crude oil market in Cushing, Oklahoma, on April 20, 2020.

Question 15

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

Accepted Answer

A change in the price of the good itself.

Question 16

If the number of buyers in a market increases, what happens to the demand curve?

Accepted Answer

It shifts right.

Question 17

Which of the following best explains why the price of beer does NOT increase right before Super Bowl Sunday?

Accepted Answer

The supply curve for beer shifts right to match the increase in demand.

Question 18

If the supply curve for a good shifts left and the demand curve shifts right, what happens to the equilibrium price?

Accepted Answer

It increases.

Question 19

Which of the following is true about the market demand curve?

Accepted Answer

It plots the relationship between total quantity demanded and market price.

Question 20

If input prices for producing a good decrease, what is the most likely effect on the supply curve?

Accepted Answer

The supply curve shifts right.

Introduction to Supply, Demand, and Competitive Equilibrium in Microeconomics

Study Guide - Practice Questions