Question 1

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

Products are homogenous and each market participant has little influence on price.

Question 2

The Latin phrase 'ceteris paribus' is used in economics to mean:

Accepted Answer

Other things being equal.

Question 3

Which of the following goods is most likely to be sold in a perfectly competitive market?

Accepted Answer

Wheat

Question 4

According to the Law of Demand, what happens when the price of a good rises?

Accepted Answer

The quantity demanded of that good falls.

Question 5

If consumer income increases, what happens to the demand for normal goods?

Accepted Answer

Demand for normal goods increases.

Question 6

If the price of regular toasters rises and defibrillator toasters are substitute goods, what happens to the demand for defibrillator toasters?

Accepted Answer

Demand for defibrillator toasters increases.

Question 7

If the price of peanut butter rises and jelly is a complementary good, what happens to the demand for jelly?

Accepted Answer

Demand for jelly decreases.

Question 8

As a fitness craze sweeps the nation, what happens to the demand for protein shakes?

Accepted Answer

Demand shifts to the right.

Question 9

If consumers expect prices to increase in the future, what happens to the demand for the good today?

Accepted Answer

Demand increases.

Question 10

If the number of consumers in a market increases, what happens to the demand for the good?

Accepted Answer

Demand increases.

Question 11

If the cost of plastic, an input for noodle-cooling chopsticks, rises, what happens to the supply curve in this industry?

Accepted Answer

Supply shifts to the left.

Question 12

A new super pizza oven reduces the time to bake stuffed crust pizza. What happens to the supply of stuffed crust pizza?

Accepted Answer

Supply shifts to the right.

Question 13

If the government subsidizes corn farmers, what happens in the market for corn?

Accepted Answer

Supply shifts to the right.

Question 14

If the price of wheat, a substitute in production for corn, decreases, what happens to the supply of corn?

Accepted Answer

Supply shifts to the right.

Question 15

If producers expect a future price increase and begin to put production into storage, what happens to the supply of corn today?

Accepted Answer

Supply shifts to the left.

Question 16

The market is in equilibrium when:

Accepted Answer

Quantity supplied equals quantity demanded.

Question 17

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

Accepted Answer

A surplus.

Question 18

Given the demand curve $$P = 800 - 2Q$$ and the supply curve $$P = 200 + Q$$, what is the equilibrium price?

Accepted Answer

$$P = 500$$

Question 19

Given the supply and demand curves $$Q_d = 10560 - 80P$$ and $$P = \frac{1}{40}Q_s + 6$$, what is the equilibrium price and quantity?

Accepted Answer

$$P^* = 60, Q^* = 5760$$

Question 20

If cheese in a can is an inferior good, what happens to its market when consumer income increases?

Accepted Answer

Demand shifts to the left.

The Market Forces of Supply and Demand: Microeconomics Study Notes

Study Guide - Practice Questions