Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where all sellers sell identical goods and no individual buyer or seller can influence the market price.

Question 2

Suppose the price of gasoline increases from $$5.00 to 10.00 $$per gallon. According to the law of demand, what will happen to the quantity of gasoline demanded, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 3

Which of the following is NOT a reason for a shift in the demand curve for donuts?

Accepted Answer

A change in the price of donuts.

Question 4

If a new study reveals that donuts are the healthiest food, what will likely happen to the demand curve for donuts?

Accepted Answer

It will shift to the right.

Question 5

Which equation represents the market demand curve if Sue’s demand is $$Q_S = 500 - 100P$$ and Carlos’s demand is $$Q_C = 1000 - 200P$$?

Accepted Answer

$$Q = 1500 - 300P$$

Question 6

If the price of coffee (a complement to donuts) decreases, what happens to the demand for donuts?

Accepted Answer

The demand for donuts increases.

Question 7

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

Accepted Answer

A change in the price of oil.

Question 8

If the government forecasts a recession and people expect to lose their jobs, what is likely to happen to the demand for normal goods like donuts?

Accepted Answer

The demand curve will shift to the left.

Question 9

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

Accepted Answer

Spam (canned meat)

Question 10

If the price of steel (an input for oil production) rises, what happens to the supply curve for oil?

Accepted Answer

It shifts to the left.

Question 11

Which of the following best describes the law of supply?

Accepted Answer

The quantity supplied rises when the price rises, ceteris paribus.

Question 12

A new technology makes it easier to extract oil. What is the likely effect on the oil market?

Accepted Answer

The supply curve for oil shifts to the right.

Question 13

If the number of sellers in a market increases, what happens to the market supply curve?

Accepted Answer

It shifts to the right.

Question 14

Which of the following is a real-world example of substitute goods?

Accepted Answer

Butter and margarine

Question 15

A student starts rock climbing and takes more road trips, increasing their gasoline consumption at every price. This is:

Accepted Answer

A shift of the demand curve for gasoline to the right.

Question 16

Which of the following is NOT a factor that shifts the supply curve?

Accepted Answer

A change in the product’s own price.

Question 17

If the price of croissants (a substitute for donuts) falls due to a government mandate, what happens to the demand for donuts?

Accepted Answer

The demand for donuts decreases.

Question 18

Which of the following best explains why prices act as a selection device in a competitive market?

Accepted Answer

Prices allocate goods to those who can afford to pay the market price.

Question 19

If the market price is above the competitive equilibrium price, what will happen in the market?

Accepted Answer

Quantity supplied will exceed quantity demanded, causing a surplus.

Question 20

Which of the following is the correct definition of 'willingness to pay' (WTP)?

Accepted Answer

The highest price a buyer is willing to pay for a good.

Microeconomics Study Guide: Demand, Supply, and Market Equilibrium

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