Question 1

Suppose the market demand for a product is given by $$Q_d = 100 - 3P$$ and the market supply is $$Q_s = 20 + P. $$What is the equilibrium price in this market?

Accepted Answer

$$20$$

Question 2

A consumer has an income of $$500. Good X costs 25$ per unit and Good Y costs 50$ per unit. If we graph this consumer’s budget constraint with Good X on the horizontal axis and Good Y on the vertical axis, what is the y-intercept?

Accepted Answer

$$10$$ units

Question 3

If the price of streaming services like Netflix increases by $$20\%$$, what is the most likely impact on the market for movie theater tickets?

Accepted Answer

The demand for movie tickets will increase because they are substitutes.

Question 4

A sudden global shortage of silicon chips increases the cost of manufacturing laptops. How will this affect the market for laptops?

Accepted Answer

The supply curve will shift to the left, raising the price.

Question 5

If the current market price of a good is artificially held above the equilibrium price, we would expect:

Accepted Answer

A surplus of the good to develop.

Question 6

Suppose a consumer’s income doubles, and simultaneously, the prices of all the goods they buy also double. How will this affect their budget constraint?

Accepted Answer

The budget constraint will not change at all.

Question 7

A local restaurant charges $$15$$ for a pizza and $$5$$ for a milkshake. What is the opportunity cost of purchasing one pizza?

Accepted Answer

$$3$$ milkshakes

Question 8

When the price of a good falls from $$6 to$$ $$4$$, the quantity demanded rises from $$20$$ units to $$30$$ units. Using the midpoint method, what is the absolute value of the price elasticity of demand?

Accepted Answer

$$1.0$$

Question 9

If a $$10\%$$ increase in the price of a good leads to a $$25\%$$ decrease in the quantity demanded, we can conclude that demand for this good is:

Accepted Answer

Relatively elastic.

Question 10

A consumer has a budget of $$40. $$Good X costs $$10$$ and Good Y costs $$5. $$The marginal benefit of the last unit of Good X they purchased was $$50$$ units of utility. If they are optimizing their consumption bundle, what MUST be the marginal benefit of the last unit of Good Y they purchased?

Accepted Answer

$$25$$

Question 11

The cross-price elasticity of demand between Good A and Good B is calculated to be $$-2.5. $$This indicates that:

Accepted Answer

Good A and Good B are strong complements.

Question 12

When the average income in a city falls by $$10\%$$, the quantity of used cars sold increases by $$5\%. $$What is the income elasticity of demand for used cars, and what type of good are they?

Accepted Answer

$$-0.5$$; Inferior good

Question 13

If Sarah can read $$4$$ chapters of economics or write $$2$$ pages of her English essay in one hour, what is her opportunity cost of writing $$1$$ page of her English essay?

Accepted Answer

$$2$$ chapters of economics

Question 14

A luxury good is mathematically defined as a good having an income elasticity of demand that is:

Accepted Answer

Greater than one.

Question 15

If the price of Good X rises from $$10 to$$ $$15$$, and as a result, the quantity demanded of Good Y increases from $$40$$ units to $$60$$ units, using the midpoint method, what is the cross-price elasticity?

Accepted Answer

$$1.0$$

Question 16

A local public transit authority decides to increase bus fares in order to generate more total revenue. This strategy will only be successful if the demand for bus rides is:

Accepted Answer

Inelastic.

Question 17

If a perfectly competitive firm tries to raise the price of its product by even one cent above the market price, its quantity demanded will fall to zero. This implies the firm faces a demand curve that is:

Accepted Answer

Perfectly elastic.

Question 18

Suppose the market for coffee is in equilibrium. If a medical study is published proving that drinking coffee significantly increases life expectancy, what will happen in the market?

Accepted Answer

The demand curve will shift to the right, leading to a higher equilibrium price and quantity.

Question 19

Clara is willing to pay $$120$$ for a concert ticket. She manages to buy one online for $$80. $$During the checkout process, she is charged a $$10$$ service fee. What is Clara’s actual consumer surplus?

Accepted Answer

$$30$$

Question 20

A seller’s goal is to maximize:

Accepted Answer

Profit

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