Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and many sellers, where no single buyer or seller can influence the price.

Question 2

If the price of Starbuck’s coffee is $$4.50 and Tim Horton’s coffee is 2.25$$, what is the relative price of a cup of Starbuck’s coffee in terms of Tim Horton’s coffee?

Accepted Answer

$$Relative\ Price = \frac{P_{Starbucks}}{P_{Tim\ Hortons}} = \frac{4.50}{2.25} = 2$$

Question 3

Which of the following is NOT one of the three things needed to have demand for a good?

Accepted Answer

Ability to produce it

Question 4

According to the law of demand, what happens when the price of a good increases, ceteris paribus?

Accepted Answer

Quantity demanded decreases

Question 5

What is the main reason behind the law of supply?

Accepted Answer

Marginal cost increases as quantity produced increases

Question 6

Which of the following would cause a shift to the right in the demand curve for electric cars?

Accepted Answer

An increase in consumer income, assuming electric cars are a normal good

Question 7

If the supply equation is $$P = 2 + 3Q_s$$ and the demand equation is $$P = 10 - 2Q_d$$, what is the equilibrium price?

Accepted Answer

$$P = 6$$

Question 8

A decrease in the price of a complement in consumption will have what effect on the demand for Good X?

Accepted Answer

Increase demand for Good X

Question 9

Which of the following scenarios would result in a movement along the supply curve, rather than a shift of the supply curve?

Accepted Answer

An increase in the price of the good

Question 10

If there is a surplus in the market for apples, which of the following must be true?

Accepted Answer

$$Q_s \u003e Q_d$$

Question 11

Which of the following would cause the supply curve for wheat to shift to the left?

Accepted Answer

A drought that destroys crops

Question 12

If both demand and supply increase for a good, what can we say about the equilibrium price and quantity?

Accepted Answer

Equilibrium price is indeterminable, equilibrium quantity will rise

Question 13

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

Accepted Answer

Instant noodles, demand increases as income decreases

Question 14

If the price of Good Y (a substitute for Good X) increases, what happens to the demand for Good X?

Accepted Answer

Demand for Good X increases

Question 15

Suppose the government increases subsidies to electric car producers. What is the likely effect on the supply curve for electric cars?

Accepted Answer

Supply curve shifts to the right

Question 16

If a consumer expects the price of a good to fall in the future, what is the likely effect on their demand for the good today?

Accepted Answer

Decrease demand today

Question 17

Which of the following best describes the concept of opportunity cost as it relates to relative price?

Accepted Answer

The value of the next best alternative forgone

Question 18

If the demand for a good decreases while supply remains constant, what will happen to the equilibrium price and quantity?

Accepted Answer

Price decreases, quantity decreases

Question 19

Which of the following is a reason why the demand curve might shift to the left?

Accepted Answer

A decrease in the price of a substitute

Question 20

If the supply of a good decreases and the demand increases at the same time, what will happen to the equilibrium price and quantity?

Accepted Answer

Price increases, quantity is indeterminable

Microeconomics Study Guide: Demand, Supply, and Market Equilibrium

Study Guide - Practice Questions

Study Guide - Flashcards