Q: Which equation represents the opportunity cost of a good in terms of its relative price?

$$\text{Relative price of Good X} = \frac{\text{Money price of Good X}}{\text{Money price of Good Y}}$$

Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good rises, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the price of energy bars increases from $$1.00 to 2.00. $$According to the demand schedule, what happens to the quantity demanded?

Accepted Answer

It decreases from 15 million to 7 million bars per week.

Question 3

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

Accepted Answer

The demand for energy bars increases.

Question 4

Which of the following is NOT a factor that shifts the demand curve for a good?

Accepted Answer

A change in the price of the good itself.

Question 5

A rightward shift of the supply curve for energy bars could be caused by:

Accepted Answer

A technological improvement in energy bar production.

Question 6

At a price of $2.00 per energy bar, the quantity demanded is 7 million and the quantity supplied is 13 million. What is the market condition?

Accepted Answer

There is a surplus of 6 million bars.

Question 7

If both demand and supply for energy bars increase, what can we predict about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases; equilibrium price is uncertain.

Question 8

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

Accepted Answer

$$	ext{Relative price of Good X} = \frac{	ext{Money price of Good X}}{	ext{Money price of Good Y}}$$

Question 9

A decrease in supply, with demand held constant, will result in:

Accepted Answer

A higher equilibrium price and lower equilibrium quantity.

Question 10

If the government imposes a tax on energy bar producers, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts leftward.

Question 11

Suppose the equilibrium price of energy bars is $$1.50 and the equilibrium quantity is 10 million bars per week. If the price is set at 1.00$$, what will happen in the market?

Accepted Answer

There will be a shortage of 9 million bars.

Question 12

Which of the following best explains the substitution effect?

Accepted Answer

When the price of a good rises, people seek alternatives, so quantity demanded decreases.

Question 13

If energy bars are a normal good, what happens to the demand for energy bars when consumer incomes rise?

Accepted Answer

Demand increases and the demand curve shifts rightward.

Question 14

A technological improvement in the production of energy bars causes:

Accepted Answer

A rightward shift of the supply curve.

Question 15

If the price of a complement to energy bars falls, what happens to the demand for energy bars?

Accepted Answer

Demand increases.

Question 16

Which of the following scenarios would cause a movement along the supply curve for energy bars, rather than a shift of the curve?

Accepted Answer

A decrease in the price of energy bars.

Question 17

If the population increases, what is the likely effect on the market for energy bars, all else equal?

Accepted Answer

The demand curve shifts rightward.

Question 18

Suppose the price of donuts (a substitute for energy bars) falls. What is the expected effect on the demand for energy bars?

Accepted Answer

The demand for energy bars decreases.

Question 19

Which of the following best describes market equilibrium?

Accepted Answer

It is the price at which quantity demanded equals quantity supplied.

Question 20

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

Accepted Answer

A surplus will force the price down.

Microeconomics: Demand, Supply, and Market Equilibrium

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