Question 1

Refer to the supply and demand diagram provided. If the price of soda is set at $2.50, what will occur in the market?

Accepted Answer

There will be a surplus because quantity supplied exceeds quantity demanded.

Question 2

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good increases, the quantity supplied increases.

Question 3

A decrease in the cost of inputs for soda production will cause which of the following changes in the supply curve?

Accepted Answer

The supply curve will shift to the right.

Question 4

If the government imposes a price ceiling below the equilibrium price, what is the most likely outcome?

Accepted Answer

A shortage will occur.

Question 5

Which of the following is NOT a determinant of supply?

Accepted Answer

Tastes and preferences

Question 6

Suppose the price of a complement to soda (such as pizza) increases. What happens to the demand for soda?

Accepted Answer

Demand for soda decreases.

Question 7

If both the demand and supply curves for electricity shift rightward, what can we say about the new equilibrium?

Accepted Answer

Equilibrium quantity will definitely increase.

Question 8

Which formula correctly represents social welfare in a market?

Accepted Answer

$$SW = CS + PS$$

Question 9

A government subsidy to soda producers will have what effect on the market?

Accepted Answer

Increase supply, shifting the supply curve right

Question 10

If the price of a substitute for soda (such as juice) increases, what happens in the soda market?

Accepted Answer

Demand for soda increases.

Question 11

Which area on a supply and demand graph represents consumer surplus?

Accepted Answer

The area above the price and below the demand curve

Question 12

If the government removes a subsidy for electricity producers while a heatwave increases demand, what happens to equilibrium price and quantity?

Accepted Answer

Price increases, quantity is indeterminate

Question 13

Which of the following best describes an inferior good?

Accepted Answer

Demand decreases as income increases

Question 14

If the number of buyers in the market increases, what happens to the demand curve?

Accepted Answer

It shifts to the right.

Question 15

A price floor set above the equilibrium price will result in:

Accepted Answer

A surplus

Question 16

Producer surplus is best described as:

Accepted Answer

The difference between what a seller receives and the minimum they are willing to accept

Question 17

If a new technology reduces the cost of producing soda, what happens to equilibrium price and quantity?

Accepted Answer

Price decreases, quantity increases

Question 18

Which of the following is an example of a government action that decreases supply?

Accepted Answer

A tax on production

Question 19

If the price of soda is set at $0.50, what will occur in the market according to the diagram?

Accepted Answer

There will be a shortage.

Question 20

Which of the following best explains why deadweight loss occurs after a price ceiling is imposed?

Accepted Answer

Some mutually beneficial trades between buyers and sellers do not occur.

Supply, Demand, and Market Equilibrium: Core Microeconomics Concepts

Study Guide - Practice Questions