Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, all selling identical goods, and no individual can influence the market price.

Question 2

Suppose the demand for gasoline is given by $$Q_d = 350 - 50P. $$What is the inverse demand function?

Accepted Answer

$$P = 7 - Q_d / 50$$

Question 3

Which of the following would cause a rightward shift in the demand curve for local tomatoes?

Accepted Answer

An increase in consumer income, assuming tomatoes are a normal good.

Question 4

If the supply of brown eggs is more expensive to produce than white eggs, what happens to the equilibrium price of brown eggs compared to white eggs, all else equal?

Accepted Answer

The equilibrium price of brown eggs will be higher.

Question 5

Which of the following is the only reason for a movement along the demand curve?

Accepted Answer

A change in the product’s own price.

Question 6

Given the supply function $$Q_s = -2 + 1P$$ and the demand function $$Q_d = 10 - 1P$$, what is the equilibrium price and quantity?

Accepted Answer

$$P = 6, Q = 4$$

Question 7

What happens in a market if the price is set above the competitive equilibrium price?

Accepted Answer

There will be excess supply (surplus).

Question 8

Which of the following would cause a leftward shift in the supply curve for oil?

Accepted Answer

An increase in the price of inputs used to produce oil.

Question 9

If the demand for roses increases sharply before Valentine’s Day, what happens to the equilibrium price and quantity of roses?

Accepted Answer

Both equilibrium price and quantity increase.

Question 10

Suppose the demand for masks triples from $$Q_d = 20 - 2P to$$ $$Q_d = 60 - 6P$$, and supply is $$Q_s = 2P. $$What is the new equilibrium price?

Accepted Answer

$$P = 5$$

Question 11

Which of the following is NOT a determinant of market demand?

Accepted Answer

Input prices

Question 12

If a new technology makes it easier to extract oil, what is the likely effect on the supply curve for oil?

Accepted Answer

The supply curve shifts right.

Question 13

Which of the following best explains why the price of beer does NOT increase right before Super Bowl Sunday, even though demand increases?

Accepted Answer

The supply of beer also increases to match the increase in demand.

Question 14

If the market price is not allowed to fluctuate, what is a likely outcome?

Accepted Answer

There may be either excess demand or excess supply.

Question 15

Which of the following is an example of a movement along the supply curve?

Accepted Answer

A decrease in the price of oil causes oil producers to supply less.

Question 16

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

Accepted Answer

Demand decreases.

Question 17

Suppose a drought reduces the supply of ground beef. What is the likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 18

Which of the following is true about the market demand curve?

Accepted Answer

It is the horizontal sum of all individual demand curves.

Question 19

If the number of sellers in a market decreases, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 20

Which of the following best describes excess demand?

Accepted Answer

Quantity demanded exceeds quantity supplied at a given price.

Supply, Demand, and Competitive Equilibrium: Foundations of Microeconomics

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