Question 1

Suppose the government imposes a tax on sellers of bottled water. What is the most likely immediate effect on the market equilibrium for bottled water?

Accepted Answer

The supply curve shifts to the left, causing the equilibrium price to rise and the equilibrium quantity to fall.

Question 2

If the market for oranges experiences a bumper crop due to favorable weather, what will happen to the equilibrium price and quantity?

Accepted Answer

The supply curve shifts to the right, resulting in a decrease in the equilibrium price and an increase in the equilibrium quantity.

Question 3

Which of the following best describes the law of supply?

Accepted Answer

An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied.

Question 4

If a shortage exists in a market, we know that the actual price is:

Accepted Answer

below the equilibrium price, and the quantity demanded is greater than the quantity supplied.

Question 5

Suppose the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower cholesterol. What is the likely effect in the market for walnuts?

Accepted Answer

Demand increases, causing both equilibrium price and quantity to rise.

Question 6

If the quantity supplied exceeds the quantity demanded for a product, what will happen in the market?

Accepted Answer

The price will fall until quantity demanded equals quantity supplied, reaching equilibrium.

Question 7

Which of the following is evidence of a shortage of walnuts?

Accepted Answer

The quantity of walnuts demanded is greater than the quantity supplied.

Question 8

If the market demand curve for gold decreases, what will happen to the equilibrium price and quantity of gold?

Accepted Answer

Both the equilibrium price and equilibrium quantity will decrease.

Question 9

Which of the following statements is true regarding equilibrium in a market?

Accepted Answer

At equilibrium, quantity demanded equals quantity supplied.

Question 10

Suppose unusually good weather results in a bumper crop of potatoes. Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes to decrease?

Accepted Answer

A decrease in consumer income, assuming potatoes are an inferior good.

Question 11

If the demand for Blu-ray players decreases because OLED televisions (a complement) become less popular, what happens to the equilibrium price and quantity of Blu-ray players?

Accepted Answer

The demand for Blu-ray players would decrease and the equilibrium price of Blu-ray players would decrease.

Question 12

If a drought sharply reduces cotton output, what is the likely effect on the equilibrium price and quantity of cotton?

Accepted Answer

The equilibrium price will increase and the equilibrium quantity will decrease.

Question 13

Which of the following would cause an increase in the equilibrium price and a decrease in the equilibrium quantity of watermelons?

Accepted Answer

A decrease in supply.

Question 14

If the market for orange juice experiences a decrease in income, assuming orange juice is a normal good, what is the likely effect?

Accepted Answer

Demand decreases, causing both equilibrium price and quantity to fall.

Question 15

Which of the following is true if both demand and supply increase in a market?

Accepted Answer

Equilibrium quantity must increase, but the effect on equilibrium price is indeterminate without more information.

Question 16

If the supply curve for a good shifts to the left, what is the likely effect on equilibrium price and quantity, all else equal?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 17

Suppose an increase in input costs in the production of electric automobiles causes the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles)?

Accepted Answer

The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase.

Question 18

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton to increase, assuming cotton is a normal good?

Accepted Answer

An increase in consumer income.

Question 19

If a surplus exists in a market, we know that the actual price is:

Accepted Answer

above the equilibrium price, and the quantity supplied is greater than the quantity demanded.

Question 20

Which of the following events would cause the supply curve for olive oil to shift to the right, resulting in a decrease in the equilibrium price?

Accepted Answer

A decrease in the cost of transporting olive oil to markets.

Microeconomics Study Guide: Demand, Supply, and Market Equilibrium

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