Question 1

Suppose a fire in Russia reduces the supply of wheat, shifting the supply curve from $$S_{spring\ 2010} to$$ $$S_{fall\ 2010} as $$shown in the first image. What is the most likely effect on the equilibrium price and quantity of wheat?

Accepted Answer

The equilibrium price increases and the equilibrium quantity decreases.

Question 2

During the COVID-19 pandemic, a shortage of semiconductor chips led to a decrease in the supply of new cars. What happened to the market for used cars as a result?

Accepted Answer

The demand for used cars increased, causing their prices to rise.

Question 3

If the government imposes a price ceiling below the equilibrium price, as in the 1974 gasoline market, what is the most likely outcome?

Accepted Answer

A shortage, where quantity demanded exceeds quantity supplied.

Question 4

Which of the following best describes consumer surplus?

Accepted Answer

The difference between the maximum amount a consumer is willing to pay and the market price.

Question 5

Given the supply and demand diagram for hamburgers, if the market price is $$2.50 and some consumers are willing to pay 5.00$$, what is the consumer surplus for those consumers?

Accepted Answer

$$5.00 - 2.50$$ = $$2.50$$

Question 6

What is the effect of a price floor set above the equilibrium price?

Accepted Answer

A surplus, where quantity supplied exceeds quantity demanded.

Question 7

If a tariff raises the domestic price of oil from $$80 to$$ $$106.64$$ per barrel, what happens to the quantity demanded and domestic production?

Accepted Answer

Quantity demanded decreases and domestic production increases.

Question 8

Which of the following is an example of a nonprice rationing mechanism?

Accepted Answer

Queuing (waiting in line)

Question 9

What is deadweight loss?

Accepted Answer

The total loss of producer and consumer surplus from underproduction or overproduction.

Question 10

Which of the following is a likely unintended consequence of bypassing price rationing with alternative mechanisms?

Accepted Answer

Costs and benefits are distributed among households in unintended ways.

Question 11

If the government issues ration coupons for gasoline during a shortage, what is the likely effect on the black market?

Accepted Answer

A black market may emerge where gasoline is sold at higher prices.

Question 12

Which of the following best describes producer surplus?

Accepted Answer

The difference between the market price and the minimum price a producer is willing to accept.

Question 13

In a competitive market, what outcome maximizes the sum of producer and consumer surplus?

Accepted Answer

The equilibrium quantity where supply and demand intersect.

Question 14

Which of the following is NOT a potential cause of deadweight loss?

Accepted Answer

Perfect competition with no externalities.

Question 15

If the government sets a minimum wage above the equilibrium wage, what is the likely result in the labor market?

Accepted Answer

A surplus of labor (unemployment).

Question 16

Suppose the government imposes a tariff on imported oil. Which of the following is a likely effect?

Accepted Answer

Domestic production increases, imports decrease, and domestic prices rise.

Question 17

If a concert venue sets ticket prices below the equilibrium price, what is the most likely outcome?

Accepted Answer

Excess demand for tickets and possible emergence of black markets.

Question 18

Which of the following is a real-world example of a price floor?

Accepted Answer

Minimum wage laws.

Question 19

If the supply of a good decreases while demand remains constant, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 20

Which of the following statements about market efficiency is correct?

Accepted Answer

Competitive markets produce what people want at the least cost when supply and demand interact freely.

Supply, Demand, Price Controls, and Market Efficiency: Microeconomics Study Notes

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