Question 1

Suppose the demand for orange juice increases due to a rise in consumer income, assuming orange juice is a normal good. What will happen to the equilibrium price and quantity in the orange juice market?

Accepted Answer

Both the equilibrium price and quantity will increase.

Question 2

If the price of beef rises and beef and chicken are substitutes, what is the likely effect on the market for chicken?

Accepted Answer

The demand for chicken will increase, raising the price of chicken.

Question 3

Given the demand equation $Q_d = 20 - 2P$ and the supply equation $Q_s = 5 + 3P$, what is the equilibrium price in the market?

Accepted Answer

$P = 3$

Question 4

If a country club only allows members to purchase tickets to its celebrity golf tournament, and the demand and supply schedules are as follows: at $P = 20$, quantity demanded by members is 400 and quantity supplied is 600. What will be the equilibrium price if only members can buy tickets?

Accepted Answer

$15$

Question 5

A decrease in the wage rate paid to workers in the orange juice industry will have what effect on the supply curve for orange juice?

Accepted Answer

Shift supply from $S_1$ to $S_2$

Question 6

If the cross-price elasticity of demand between two goods is positive, what does this indicate about the relationship between the goods?

Accepted Answer

They are substitutes.

Question 7

Suppose a technological advancement increases the productivity of apple production. What will happen to the production possibilities frontier (PPF)?

Accepted Answer

The PPF will shift outward along the apple axis.

Question 8

If the price elasticity of supply for a good is $0.5$ and the price increases by $4\%$, by what percentage will the quantity supplied increase?

Accepted Answer

$2\%$

Question 9

If a shortage exists in a market, what will happen to the price and quantity supplied?

Accepted Answer

Price will increase and quantity supplied will increase.

Question 10

If the opportunity cost of increasing the production of cookies from 200 dozen to 400 dozen is 300 pounds of coffee, what does this mean?

Accepted Answer

Producing 200 more dozen cookies requires giving up 300 pounds of coffee.

Question 11

If the price of a DVD player falls, what is the likely effect on the demand for DVDs?

Accepted Answer

The demand for DVDs will increase.

Question 12

Suppose the government imposes a price ceiling below the equilibrium price in the market for apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 13

If the supply curve for a good shifts to the right, what will happen to the equilibrium price and quantity, all else equal?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 14

If two goods are complements, what is the sign of their cross-price elasticity of demand?

Accepted Answer

Negative

Question 15

A study finds that meat and poultry prices have a positive impact on the price of fish. What does this imply about the relationship between fish and meat/poultry?

Accepted Answer

Meat and poultry are substitutes for fish.

Question 16

If the price of syrup used in the production of soda increases, what will happen to the supply curve for soda?

Accepted Answer

The supply curve will shift to the left.

Question 17

If a hurricane destroys a large portion of the orange crop in Florida, what is the likely effect on the equilibrium price and quantity of oranges?

Accepted Answer

Price will increase and quantity will decrease.

Question 18

If the demand for a good is inelastic, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will increase.

Question 19

Which of the following would cause a movement along the demand curve for European autos in the United States?

Accepted Answer

An increase in the price of European autos.

Question 20

If the supply of beef increases due to a decrease in the price of feed grains, what will happen to the equilibrium price and quantity of beef?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Microeconomics: Demand, Supply, and Market Equilibrium Study Guide

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