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 in terms of the online course?

Accepted Answer

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

Question 3

Which of the following is NOT a requirement for a consumer to demand a good?

Accepted Answer

The consumer must already own the good.

Question 4

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 5

Which effect explains why consumers buy 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 new cars?

Accepted Answer

An increase in expected future income.

Question 8

If energy bars and protein shakes are substitutes, what happens to the demand for energy bars if the price of protein shakes increases?

Accepted Answer

The demand for energy bars increases.

Question 9

Which of the following is true about inferior goods?

Accepted Answer

Demand for inferior goods decreases as income increases.

Question 10

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

Accepted Answer

A change in the price of smartphones.

Question 11

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

Accepted Answer

The quantity supplied increases.

Question 12

If the price of wheat (a factor of production for bread) rises, what is the likely effect on the supply of bread?

Accepted Answer

Supply of bread decreases and the supply curve shifts leftward.

Question 13

Suppose a new technology reduces the cost of producing solar panels. What is the expected effect on the supply curve for solar panels?

Accepted Answer

The supply curve shifts rightward.

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

If both demand and supply for laptops 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 17

If demand for bicycles decreases while supply increases, what is the expected effect on the equilibrium price?

Accepted Answer

Equilibrium price will decrease.

Question 18

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

Accepted Answer

The supply curve shifts leftward.

Question 19

If the price of a good is below the equilibrium price, what will happen?

Accepted Answer

There will be a shortage and the price will rise.

Question 20

Which formula correctly 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}} $

Microeconomics: Demand and Supply – Chapter 3 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards