Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

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

Question 2

Suppose the demand for gasoline is given by $Q_D = 350 - 50P$. What is the inverse demand function?

Accepted Answer

$P = 7 - Q_D / 50$

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 apples?

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 requiring 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 tastes.

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 and quantity decreases.

Question 8

Given the supply function $Q_S = -2 + 1P$ and the demand function $Q_D = 10 - 1P$, what is the equilibrium price and quantity?

Accepted Answer

$P = 6$, $Q = 4$

Question 9

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

Accepted Answer

A technological advancement that reduces production costs.

Question 10

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

Accepted Answer

It increases.

Question 11

Suppose a drought causes a decrease in the supply of ground beef, but demand remains unchanged. What is the most likely effect on the market?

Accepted Answer

Equilibrium price increases and quantity decreases.

Question 12

Which of the following best explains why there is often a parking problem on university campuses?

Accepted Answer

The supply of parking spaces is less than the quantity demanded at the current price.

Question 13

If the market price is set below the equilibrium price, what will occur?

Accepted Answer

Excess demand (shortage)

Question 14

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

Accepted Answer

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

Question 15

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

Accepted Answer

$Q_D = 60 - 6P$

Question 16

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

Accepted Answer

A change in the price of oil itself.

Question 17

If the market supply curve shifts left while the demand curve remains unchanged, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and quantity decreases.

Question 18

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

Accepted Answer

It plots the relationship between total quantity demanded and market price, holding all else equal.

Question 19

A decrease in the price of a complement good will have what effect on the demand curve for the original good?

Accepted Answer

Shift the demand curve to the right.

Question 20

Which of the following best describes excess supply in a market?

Accepted Answer

The quantity supplied is greater than the quantity demanded at a given price.

ECN104 Lecture 4

Study Guide - Practice Questions