Question 1

Suppose a news story reports that a famous athlete's shoe splits open during a televised game, causing negative publicity for the brand. According to the law of demand, what is the most likely immediate effect on the market for that brand's shoes?

Accepted Answer

The demand curve shifts to the left, decreasing both price and quantity sold.

Question 2

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, all firms selling identical products, and no barriers to entry.

Question 3

If the price of a product falls, which two effects explain why the quantity demanded increases?

Accepted Answer

The income effect and the substitution effect.

Question 4

Consider the market for instant noodles, an inferior good. If consumer incomes rise, what happens to the demand for instant noodles?

Accepted Answer

Demand decreases and the demand curve shifts left.

Question 5

Which of the following scenarios would cause a movement along the demand curve, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of the product itself.

Question 6

If the price of Big Macs increases, what is the expected effect on the demand for Whoppers, assuming they are substitute goods?

Accepted Answer

Demand for Whoppers increases.

Question 7

Which of the following would NOT shift the supply curve for athletic shoes?

Accepted Answer

A decrease in the price of athletic shoes.

Question 8

Suppose a new firm enters the athletic shoe market. What is the most likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 9

If both demand and supply increase in a market, what can we be certain about regarding the new equilibrium?

Accepted Answer

Equilibrium quantity will rise.

Question 10

A farmer can plant either corn or soybeans. If the price of soybeans rises, what is the expected effect on the supply of corn?

Accepted Answer

Supply of corn decreases.

Question 11

Which equation represents the market equilibrium condition?

Accepted Answer

$$Q_d = Q_s$$

Question 12

If the price of athletic shoes is set above the equilibrium price, what will occur in the market?

Accepted Answer

A surplus will occur, and price will fall.

Question 13

Which of the following is an example of a complement in consumption?

Accepted Answer

Hot dogs and hot dog buns.

Question 14

If consumers expect the price of gasoline to increase tomorrow, what is the likely effect on today's demand for gasoline?

Accepted Answer

Today's demand will increase.

Question 15

Which of the following would cause a shift to the right in the supply curve for athletic shoes?

Accepted Answer

A technological improvement in shoe production.

Question 16

If the price of a product decreases, what happens to the quantity supplied according to the law of supply?

Accepted Answer

Quantity supplied decreases.

Question 17

Suppose the price of McDonald's fries increases. What is the expected effect on the demand for Big Macs, assuming they are complements?

Accepted Answer

Demand for Big Macs decreases.

Question 18

Which of the following is a correct statement about shifts versus movements along curves?

Accepted Answer

A change in the price of the good causes a movement along the demand curve.

Question 19

If both the demand and supply curves shift to the right, but demand shifts more than supply, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price rises and equilibrium quantity rises.

Question 20

Millennials and Gen Z have different tastes than previous generations. If these groups become the main consumers of athletic shoes and prefer group fitness, what is the likely effect on the market for athletic shoes?

Accepted Answer

Demand for athletic shoes will increase.

Microeconomics Study Notes: Chapter 3 – Where Prices Come From: Interaction of Supply and Demand

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