Question 1

In the circular flow model, which of the following best describes the role of households in the commodity market?

Accepted Answer

Households demand goods and services from firms.

Question 2

Suppose the demand for a product is given by $$D = 10 - 2p$$ and the supply is $$S = 2p - 4. $$What is the equilibrium price?

Accepted Answer

$$p = 2$$

Question 3

If the price of a substitute in consumption increases, what is the likely effect on the demand curve for the original good?

Accepted Answer

The demand curve shifts to the right.

Question 4

Which of the following would NOT cause an increase in supply?

Accepted Answer

An increase in the price of a complement in production.

Question 5

Given the supply function $$S = 5p - 20$$ and the demand function $$D = 80 - 0.5p$$, what is the equilibrium quantity?

Accepted Answer

$$Q = 40$$

Question 6

If the wage rate in the labour market increases, what is the most likely effect on the quantity of labour supplied?

Accepted Answer

Quantity of labour supplied increases.

Question 7

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

Accepted Answer

Increase demand for the original good.

Question 8

If the demand for apples increases due to a rise in the price of oranges (a substitute), what happens to the equilibrium price and quantity of apples?

Accepted Answer

Price rises, quantity rises.

Question 9

Which of the following is assumed to be constant along an individual's demand curve for good X?

Accepted Answer

The price of a substitute good Y.

Question 10

If the supply of a good is given by $$S = 2p - w$$ and the wage rate $$w$$ increases, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 11

Suppose the demand for a good is $$D = 16 - 2p$$ and the supply is $$S = 2p - 2w$$, where $$w is $$the wage paid to employees. If $$w$$ increases from 1 to 2, what happens to the equilibrium price?

Accepted Answer

It increases.

Question 12

Which of the following best describes equilibrium in the capital market?

Accepted Answer

The desired amount saved by households equals the desired amount borrowed by firms.

Question 13

If the price of a complement in production increases, what is the likely effect on the supply of the original good?

Accepted Answer

Supply increases.

Question 14

A higher equilibrium price and lower equilibrium quantity could be caused by:

Accepted Answer

An increase in the price of a substitute in production.

Question 15

If the demand for a good is given by $$D = 12 - 2p$$ and the supply is $$S = 2p - 4$$, what is the equilibrium price and quantity?

Accepted Answer

$$p = 2, Q = 8$$

Question 16

Which of the following would cause the supply curve for a product to shift to the right?

Accepted Answer

A technological improvement.

Question 17

If goods X and Y are complements in consumption and the price of X rises, what happens to the demand for Y?

Accepted Answer

It decreases.

Question 18

In the labour market, equilibrium wages balance:

Accepted Answer

The desired hours worked by households with the desired hours employed by firms.

Question 19

If the price of a good rises, the quantity of that good bought and sold falls. This demonstrates:

Accepted Answer

The law of demand.

Question 20

Which of the following is a plausible real-world example of a complement in production?

Accepted Answer

Beef and leather produced from cattle.

Question 21

If the supply of a product increases while demand remains unchanged, what happens to the equilibrium price and quantity?

Accepted Answer

Price falls, quantity rises.

Microeconomics Study Guide: The Circular Flow, Equilibrium, and Market Dynamics

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