Question 1

In a perfectly competitive market, which of the following is NOT an assumption of the demand and supply model?

Accepted Answer

Firms can set prices above the market equilibrium.

Question 2

Suppose the price of chicken sandwiches is set below the equilibrium price. What is the most likely outcome in the market?

Accepted Answer

A shortage will occur, and sellers will raise prices.

Question 3

Which equation correctly represents the condition for market equilibrium?

Accepted Answer

$$ Q_d = Q_s $$

Question 4

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

Accepted Answer

The demand for the original good increases.

Question 5

Which of the following is a demand shifter?

Accepted Answer

Change in the number of consumers

Question 6

A decrease in the price of a complement will cause the demand curve for the related good to:

Accepted Answer

Shift to the right

Question 7

If a new technology reduces production costs for electric cars, what will happen to the supply curve for electric cars?

Accepted Answer

It will shift to the right.

Question 8

Which of the following best describes a normal good?

Accepted Answer

Demand increases as income increases.

Question 9

Suppose the price of beef rises. What is the likely effect on the market for chicken, a substitute?

Accepted Answer

The demand for chicken will increase.

Question 10

If the government imposes a tax on electricity, an important input for aluminum production, what happens to the supply of aluminum?

Accepted Answer

Supply decreases and the supply curve shifts left.

Question 11

Which of the following scenarios best illustrates a change in quantity demanded, not a change in demand?

Accepted Answer

A decrease in the price of the good leads to more units sold.

Question 12

If both demand and supply increase simultaneously, what can we say about the equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 13

A hurricane is expected to hit in two days. What is the likely effect on the market for bottled water?

Accepted Answer

Demand will increase, shifting the demand curve right.

Question 14

Which of the following is an example of complements in production?

Accepted Answer

Beef and leather

Question 15

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

Accepted Answer

Price rises, quantity falls.

Question 16

Which of the following is NOT a supply shifter?

Accepted Answer

Change in consumer tastes

Question 17

If the price of ramen noodles (an inferior good) falls during a recession, what is the likely effect on its market?

Accepted Answer

Demand for ramen noodles will increase.

Question 18

Suppose there is a large increase in demand and a small decrease in supply for a product. What is the most likely outcome?

Accepted Answer

Price rises, quantity rises.

Question 19

Which of the following best describes the relationship between price and quantity supplied?

Accepted Answer

As price increases, quantity supplied increases.

Question 20

A new tax increases the cost of advertising for a product. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Demand, Supply, and Market Equilibrium: Microeconomics Study Guide

Study Guide - Practice Questions