Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market where all sellers sell identical goods and no individual buyer or seller can affect 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 factor that causes a movement along the demand curve for a good?

Accepted Answer

A change in the price of the good itself.

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

If a new technology reduces the cost of producing oil, what happens to the supply curve for oil?

Accepted Answer

It shifts to the right.

Question 8

Which of the following scenarios best illustrates excess demand in a market?

Accepted Answer

The quantity demanded exceeds the quantity supplied at the current price.

Question 9

Suppose the demand for masks is $$Q_d = 20 - 2P$$ and the supply is $$Q_s = 2P. If $$demand triples, what is the new demand equation?

Accepted Answer

$$Q_d = 60 - 6P$$

Question 10

If the price of roses increases right before Valentine’s Day, which of the following best explains this phenomenon?

Accepted Answer

A rightward shift in the demand curve for roses.

Question 11

Which of the following would NOT cause a shift in the supply curve for oil?

Accepted Answer

A change in the price of oil.

Question 12

If both the demand and supply curves for a good shift to the right, what can we say about the equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 13

Which of the following is an example of a market as defined in microeconomics?

Accepted Answer

A group of buyers and sellers trading stocks on the New York Stock Exchange.

Question 14

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

Accepted Answer

The demand decreases.

Question 15

A drought causes a decrease in the supply of ground beef. What is the likely effect on the equilibrium price and quantity of ground beef?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 16

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good rises, the quantity supplied rises, ceteris paribus.

Question 17

If the market price is set below the equilibrium price, what will occur in the market?

Accepted Answer

Excess demand (shortage)

Question 18

Which of the following is a reason why the demand curve for gasoline is not the same for everyone?

Accepted Answer

Differences in tastes and preferences among consumers.

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

Suppose the market for used cars is highly competitive. Which of the following statements is true?

Accepted Answer

No individual buyer or seller can influence the market price.

Supply, Demand, and Competitive Equilibrium: Microeconomics Study Guide

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