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 textbook is $120 and the money price of the next best alternative (an online course) is $80, what is the relative price of the textbook?

Accepted Answer

$ \frac{120}{80} = 1.5 $

Question 3

Which of the following is NOT a requirement for demand?

Accepted Answer

Having unlimited resources to buy all goods

Question 4

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

Accepted Answer

Quantity demanded decreases

Question 5

Which effect explains why a consumer buys less of a good when its price rises, because they can no longer afford all the things they previously bought?

Accepted Answer

Income effect

Question 6

If the price of energy bars falls from $2.00 to $1.00, what happens on the demand curve?

Accepted Answer

There is a movement down along the demand curve.

Question 7

Which of the following would cause a rightward shift of the demand curve for normal goods?

Accepted Answer

An increase in income

Question 8

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 9

Which of the following is an example of an inferior good?

Accepted Answer

Generic brand groceries

Question 10

A firm will supply a good only if:

Accepted Answer

It can profit from producing it and has made a definite plan to sell it.

Question 11

According to the law of supply, what happens to the quantity supplied when the price of a good increases, all else equal?

Accepted Answer

Quantity supplied increases

Question 12

If the price of a factor of production used to make energy bars rises, what happens to the supply of energy bars?

Accepted Answer

Supply decreases and the supply curve shifts leftward.

Question 13

Which of the following would cause a leftward shift of the supply curve?

Accepted Answer

A natural disaster

Question 14

Market equilibrium occurs when:

Accepted Answer

Quantity demanded equals quantity supplied

Question 15

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 16

Suppose both demand and supply for energy bars increase. What happens to the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases; change in equilibrium price is uncertain

Question 17

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

Accepted Answer

Equilibrium price falls; change in equilibrium quantity is uncertain

Question 18

Which formula represents the opportunity cost of a good in terms of its relative price?

Accepted Answer

$ 	ext{Relative price} = \frac{	ext{Money price of good}}{	ext{Money price of next best alternative}} $

Question 19

A technological advance in the production of energy bars will most likely:

Accepted Answer

Shift the supply curve rightward

Question 20

If the population of a city increases, what is the expected effect on the demand for energy bars?

Accepted Answer

Demand increases and the demand curve shifts rightward

Microeconomics: Demand and Supply (Chapter 3) – Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards