Question 1

Which of the following best describes the Law of Demand?

Accepted Answer

As the price of a good decreases, the quantity demanded increases, holding all other factors constant.

Question 2

Given the demand function for pork $$Q = 286 - 20p$$, what is the slope of the demand curve?

Accepted Answer

The slope is $$-20$$

Question 3

If the price of beef increases by $0.60, what happens to the demand curve for pork?

Accepted Answer

The demand curve for pork shifts to the right.

Question 4

Suppose the demand function for pork is $$Q = 286 - 20p$$ and the supply function is $$Q = 88 + 40p. $$What is the equilibrium price?

Accepted Answer

$$p = 3.30$$

Question 5

Which of the following is NOT a determinant of demand?

Accepted Answer

Costs of production

Question 6

If the supply function for processed pork is $$Q = 88 + 40p$$, what happens to the quantity supplied if the price increases by $$1$$?

Accepted Answer

Quantity supplied increases by $$40$$

Question 7

A quota is imposed on foreign steel imports in the United States. What is the effect on the total American supply curve for steel?

Accepted Answer

The total supply curve shifts to the left.

Question 8

What is excess demand?

Accepted Answer

The amount by which the quantity demanded exceeds the quantity supplied at a specified price.

Question 9

If a price ceiling is imposed below the equilibrium price, what is the likely outcome?

Accepted Answer

Excess demand

Question 10

In a perfectly competitive market, which of the following is true?

Accepted Answer

Everyone is a price taker.

Question 11

Given the inverse demand curve $$p = 14.30 - 0.05Q$$, how much must the price fall for consumers to buy 1 million more kg of pork per year?

Accepted Answer

$$0.05$$

Question 12

If the supply function is $$Q = 178 + 40p - 60ph$$ and the price of hogs ($$ph) $$increases by $$1$$, what happens to the equilibrium price of pork?

Accepted Answer

The equilibrium price of pork increases by $$1$$

Question 13

Which government intervention is most likely to cause the quantity demanded to differ from the quantity supplied?

Accepted Answer

Price ceilings

Question 14

Suppose the demand function is $$Q = a - bp$$ and the supply function is $$Q = c + ep. $$What is the equilibrium price?

Accepted Answer

$$p^* = \frac{a - c}{b + e}$$

Question 15

A ban on rice imports in Japan shifts the supply curve. What is the effect on equilibrium price?

Accepted Answer

The equilibrium price increases.

Question 16

If a binding minimum wage is imposed in a labor market, what is the likely effect?

Accepted Answer

Excess supply of labor (unemployment) occurs.

Question 17

Which of the following is a real-world example of a government intervention that shifts the supply curve?

Accepted Answer

A quota on steel imports

Question 18

If the demand for broadband service is aggregated from small and large firms, what is the total demand at a price of 40¢ per Kbps?

Accepted Answer

The sum of the quantities demanded by small and large firms at 40¢ per Kbps.

Question 19

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Firms can influence the market price.

Supply and Demand: Foundations of Market Analysis

Study Guide - Practice Questions