Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and many sellers, so no single buyer or seller can influence the price.

Question 2

If the money price of a movie ticket is $15 and the money price of a concert ticket is $30, what is the relative price of a movie ticket in terms of concert tickets?

Accepted Answer

$ \frac{15}{30} = 0.5 $ concert tickets per movie ticket

Question 3

According to the law of demand, what happens to the quantity demanded of a good when its price increases, all else equal?

Accepted Answer

The quantity demanded decreases.

Question 4

Which of the following is NOT a reason why a change in price affects quantity demanded?

Accepted Answer

Marginal cost effect

Question 5

If the price of a substitute for energy bars rises, what happens to the demand for energy bars?

Accepted Answer

Demand for energy bars increases.

Question 6

Suppose the demand curve for apples shifts rightward. Which of the following could explain this change?

Accepted Answer

An increase in consumer income, assuming apples are a normal good.

Question 7

Which of the following best describes the difference between a movement along the demand curve and a shift of the demand curve?

Accepted Answer

A movement along the demand curve is caused by a change in the price of the good, while a shift is caused by a change in other factors affecting demand.

Question 8

Which of the following will cause a leftward shift of the supply curve for wheat?

Accepted Answer

An increase in the price of a factor of production used to grow wheat.

Question 9

If the price of a complement in production rises, what happens to the supply of the related good?

Accepted Answer

The supply of the related good increases.

Question 10

A natural disaster destroys a large portion of the crop in a region. What is the likely effect on the supply curve for that crop?

Accepted Answer

The supply curve shifts leftward.

Question 11

At the equilibrium price in a market, which of the following is true?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 12

If the price of energy bars is set above the equilibrium price, what will happen in the market?

Accepted Answer

There will be a surplus of energy bars.

Question 13

Suppose both demand and supply for smartphones increase. What can be predicted about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity will increase, but the change in equilibrium price is uncertain.

Question 14

If demand for a product decreases while supply increases, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price falls, but the change in equilibrium quantity is uncertain.

Question 15

Which formula represents the opportunity cost of buying good A instead of good B?

Accepted Answer

$ 	ext{Opportunity Cost} = \frac{	ext{Money Price of A}}{	ext{Money Price of B}} $

Question 16

A firm will supply a good only if:

Accepted Answer

It can cover its marginal cost of production.

Question 17

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

Accepted Answer

Technology

Question 18

If the price of a good is expected to rise in the future, what is the likely effect on current supply?

Accepted Answer

Current supply decreases.

Question 19

Which of the following best describes a normal good?

Accepted Answer

A good for which demand increases as income increases.

Question 20

Suppose the population of a city increases significantly. What is the likely effect on the demand for housing in that city?

Accepted Answer

Demand for housing increases.

Microeconomics Chapter 3: Demand and Supply – Study Notes

Study Guide - Practice Questions

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