Question 1

Refer to the first image. If the price decreases from $$P_A to$$ $$P_B$$, what happens to the quantity demanded according to the law of demand?

Accepted Answer

Quantity demanded increases from $$Q_A to$$ $$Q_B$$

Question 2

Which effect explains why a decrease in the price of Pepsi leads consumers to buy more Pepsi and less Coca-Cola?

Accepted Answer

Substitution effect

Question 3

If the demand curve shifts to the right, what will happen to the equilibrium price and equilibrium quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases

Question 4

Which of the following is NOT a shifter of the demand curve?

Accepted Answer

Number of firms

Question 5

Refer to the second image. If the price increases from $$P_1 to$$ $$P_2$$, what happens to the quantity supplied?

Accepted Answer

Quantity supplied increases from $$Q_1 to$$ $$Q_2$$

Question 6

What is the economic term for goods that have a negative relationship between income and demand?

Accepted Answer

Inferior goods

Question 7

If the price of an input used in production increases, what happens to the supply curve for the final product?

Accepted Answer

Supply curve shifts left

Question 8

If the price of gasoline increases, what happens to the demand for automobiles (assuming they are complements)?

Accepted Answer

Demand for automobiles decreases

Question 9

Which of the following would cause a movement along the supply curve, rather than a shift?

Accepted Answer

A change in the price of the good

Question 10

If the population in a market increases, what happens to the demand curve?

Accepted Answer

Demand curve shifts right

Question 11

Refer to the third image. What does the movement from point A to point B on the supply curve represent?

Accepted Answer

A movement along the supply curve due to a change in price

Question 12

If firms expect the price of their product to increase in the future, what will happen to current supply?

Accepted Answer

Current supply will decrease

Question 13

What happens in the market when the price is set below the equilibrium price?

Accepted Answer

A shortage occurs

Question 14

Which of the following is a supply shifter?

Accepted Answer

Technological changes

Question 15

If the supply curve shifts to the left, what happens to equilibrium price and equilibrium quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases

Question 16

A positive technological change in production will have what effect on the supply curve?

Accepted Answer

Shift supply curve to the right

Question 17

If the price of a substitute in production increases, what happens to the supply of the other good?

Accepted Answer

Supply of the other good decreases

Question 18

Which of the following best describes market equilibrium?

Accepted Answer

Quantity supplied equals quantity demanded at a single price

Question 19

If tastes and preferences shift toward a product, what happens to the demand curve?

Accepted Answer

Demand curve shifts right

Question 20

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

Accepted Answer

Supply curve shifts left

Chapter 3

Study Guide - Practice Questions