Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the price of coffee increases. According to the substitution effect, what is likely to happen to the quantity demanded of tea, a substitute good?

Accepted Answer

The quantity demanded of tea will increase.

Question 3

If the market for used cars experiences an increase in the number of buyers, what will happen to the demand curve for used cars?

Accepted Answer

The demand curve will shift to the right.

Question 4

Which of the following is NOT a determinant of demand?

Accepted Answer

Resource prices

Question 5

A decrease in the price of printers leads to an increase in the demand for ink cartridges. This is an example of which type of goods?

Accepted Answer

Complementary goods

Question 6

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

Accepted Answer

A decrease in the price of apples

Question 7

Suppose the government sets a price ceiling below the equilibrium price for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments

Question 8

If the price of microchips falls, what is the likely effect on the supply of computers, assuming microchips are a key input?

Accepted Answer

The supply of computers will increase.

Question 9

Which equation represents the market equilibrium condition?

Accepted Answer

$Q_d = Q_s$

Question 10

If both demand and supply increase simultaneously, what happens to the equilibrium quantity?

Accepted Answer

It increases.

Question 11

A new tax is imposed on cigarettes. What is the most likely effect on the supply curve for cigarettes?

Accepted Answer

The supply curve shifts to the left.

Question 12

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the right mix of goods most highly valued by society

Question 13

If the price of gasoline is fixed below the equilibrium price during a crisis, what is the likely result?

Accepted Answer

A shortage of gasoline

Question 14

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

Accepted Answer

An increase in the price of cucumbers, a related good

Question 15

Suppose the equilibrium price of a product is $3. If the government sets a price floor at $5, what will happen in the market?

Accepted Answer

There will be a surplus.

Question 16

If consumer income increases and the demand for ramen noodles decreases, what type of good is ramen noodles?

Accepted Answer

Inferior good

Question 17

Which of the following is an example of the income effect?

Accepted Answer

A decrease in the price of a good increases the consumer's real purchasing power, leading to an increase in quantity demanded.

Question 18

A new technology reduces the cost of producing electric cars. What is the likely effect on the market for electric cars?

Accepted Answer

The supply curve shifts to the right, leading to a lower equilibrium price and higher equilibrium quantity.

Question 19

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

The demand for the original good increases.

Question 20

Which of the following best explains why shortages occur when a price ceiling is imposed below equilibrium?

Accepted Answer

Quantity demanded exceeds quantity supplied at the ceiling price.

Microeconomics Study Notes: Demand, Supply, and Market Equilibrium

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