Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where all sellers sell an identical good or service and no individual buyer or seller can influence the market price.

Question 2

Suppose the price of gasoline falls from $3.00 to $2.00 per gallon. According to the law of demand, what is the most likely outcome?

Accepted Answer

The quantity demanded of gasoline will increase.

Question 3

Which of the following would cause a shift in the demand curve for coffee to the right?

Accepted Answer

An increase in consumer income, assuming coffee is a normal good.

Question 4

If the supply curve for oil shifts to the left, which of the following is a possible explanation?

Accepted Answer

An increase in the cost of inputs used to produce oil.

Question 5

Which of the following is the only reason for a movement along the demand curve for a product?

Accepted Answer

A change in the product's own price.

Question 6

Suppose the market for roses experiences a sharp increase in demand right before Valentine’s Day. What is the most likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity increases.

Question 7

If both the demand and supply curves for a good shift to the right, what can we say about the new equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 8

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

Accepted Answer

A decrease in the price of smartphones.

Question 9

If the government imposes a price ceiling below the equilibrium price for gasoline, what is the most likely result?

Accepted Answer

A shortage of gasoline.

Question 10

Suppose the demand for oil decreases due to the adoption of energy-saving technologies. What happens to the equilibrium price and quantity in the oil market?

Accepted Answer

Equilibrium price decreases and equilibrium quantity decreases.

Question 11

Which of the following best illustrates the law of supply?

Accepted Answer

As the price of a good increases, the quantity supplied increases.

Question 12

A new technology reduces the cost of producing electric cars. What is the most likely effect on the supply curve for electric cars?

Accepted Answer

The supply curve shifts to the right.

Question 13

If the price of a substitute good increases, what is the expected effect on the demand for the original good?

Accepted Answer

The demand for the original good increases.

Question 14

Suppose the market price of a good is above the competitive equilibrium price. What will happen in the market?

Accepted Answer

There will be excess supply (surplus).

Question 15

Which of the following equations represents the condition for competitive equilibrium in a market?

Accepted Answer

$Q_d = Q_s$

Question 16

A student’s income increases, and as a result, she buys more organic food. For this student, organic food is:

Accepted Answer

A normal good.

Question 17

If the number of sellers in the market increases, what happens to the supply curve?

Accepted Answer

It shifts to the right.

Question 18

Suppose the government subsidizes gasoline, lowering its price from $2.40 to $0.27 per gallon. According to the law of demand, what happens to the quantity of gasoline demanded?

Accepted Answer

It increases.

Question 19

A movement from one point to another along the same demand curve for gasoline, due to a change in price, is called:

Accepted Answer

A movement along the demand curve.

Question 20

If a farmer expects the price of corn to rise in the future, what is the most likely effect on the current supply of corn?

Accepted Answer

The current supply will decrease.

Microeconomics Chapter 4: Demand, Supply, and Equilibrium

Study Guide - Practice Questions

Study Guide - Flashcards