Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market where all participants are too small to have any aggregate effect on the market price.

Question 2

Suppose the price of apples increases from $$1.00 to 1.50 $$per pound. According to the law of demand, what is the expected effect on the quantity demanded of apples, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 3

Which of the following is an example of a change in demand rather than a change in quantity demanded?

Accepted Answer

A new study shows that eating rice is healthier, leading more people to want rice at every price.

Question 4

If the price of bananas increases, what is the expected effect on the demand for apples, assuming they are substitutes?

Accepted Answer

The demand for apples will increase.

Question 5

Which of the following would cause a rightward shift in the supply curve for smartphones?

Accepted Answer

A technological innovation that reduces production costs.

Question 6

Given the linear demand function $$P = a - bQ_D$$ and the linear supply function $$P = c + dQ_S$$, what is the equilibrium quantity $$Q^*$$?

Accepted Answer

$$Q^* = \frac{a - c}{b + d}$$

Question 7

If the demand for a normal good increases as consumer income rises, what type of good is it?

Accepted Answer

Normal good

Question 8

Suppose the supply curve for socks shifts to the left. Which of the following could explain this shift?

Accepted Answer

A new tax imposed on sock manufacturers.

Question 9

If the market price of gold chains is above the equilibrium price, what will happen in the market?

Accepted Answer

There will be a surplus of gold chains.

Question 10

Which of the following best illustrates the concept of opportunity cost?

Accepted Answer

Buying a new iPhone instead of saving the money for a vacation.

Question 11

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

Accepted Answer

The equilibrium quantity will definitely rise.

Question 12

Suppose the demand for rice increases due to a change in consumer preferences. What happens to the equilibrium price and quantity, ceteris paribus?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 13

A new social media platform launches, increasing the number of suppliers in the market. What is the likely effect on the supply curve and equilibrium price?

Accepted Answer

Supply curve shifts right, equilibrium price falls.

Question 14

If the price of a complement to rice (such as curry) increases, what is the expected effect on the demand for rice?

Accepted Answer

The demand for rice will decrease.

Question 15

Given the following demand and supply equations: $$P = 12 - Q_D$$ and $$P = 4 + 3Q_S$$, what is the equilibrium price?

Accepted Answer

$$P^* = 10$$

Question 16

Which of the following is NOT a shifter of the supply curve?

Accepted Answer

Consumer preferences

Question 17

If the price of labor (an input) increases for smartphone manufacturers, what is the likely effect on the supply of smartphones?

Accepted Answer

Supply decreases, shifting the supply curve left.

Question 18

Which of the following best describes the difference between a change in quantity supplied and a change in supply?

Accepted Answer

A change in quantity supplied is a movement along the supply curve; a change in supply is a shift of the supply curve.

Question 19

If the government announces that the price of a good will rise in the future, what is the likely effect on current demand?

Accepted Answer

Current demand will increase.

Supply and Demand: Foundations of Competitive Markets

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