Question 1

Suppose the demand for coffee is given by $$Q = 12 - p. $$What is the quantity demanded when the price is $$4 per lb$$?

Accepted Answer

$$Q = 8$$

Question 2

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

Accepted Answer

The demand curve shifts to the right

Question 3

Given the supply function $$Q = 9 + 0.5p$$, what is the derivative $$\frac{dQ}{dp}$$ and what does it represent?

Accepted Answer

$$\frac{dQ}{dp} = 0.5$$, representing the change in quantity supplied for a one dollar increase in price

Question 4

If the government imposes a binding price ceiling below the equilibrium price, what is the likely outcome in the market?

Accepted Answer

A persistent shortage (excess demand)

Question 5

Suppose the demand for coffee increases due to a rise in consumer income. What happens to the equilibrium price and quantity in the coffee market?

Accepted Answer

Both equilibrium price and quantity increase

Question 6

If the supply curve for coffee shifts to the left due to an increase in the price of cocoa, what happens to the equilibrium price and quantity of coffee?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases

Question 7

Given the demand function $$Q = 8.56 - p - 0.3p_s + 0.1Y$$, where $$p is $$the price of coffee, $$p_s is $$the price of sugar, and $$Y is $$income, what is the effect of a $$1$$ unit increase in $$p_s on $$the quantity demanded?

Accepted Answer

Quantity demanded decreases by $$0.3$$ units

Question 8

If the government imposes a specific sales tax of $$t$$ per unit on sellers, what happens to the supply curve?

Accepted Answer

The supply curve shifts vertically upward by $$t$$

Question 9

In a perfectly competitive market, which of the following is NOT a characteristic?

Accepted Answer

Firms can set prices above the market equilibrium

Question 10

Suppose the market for labor has a binding minimum wage (price floor) above the equilibrium wage. What is the likely result?

Accepted Answer

Unemployment (excess supply of labor)

Question 11

If the demand for coffee is $$Q_d = 12 - p$$ and the supply is $$Q_s = 9 + 0.5p$$, what is the equilibrium price?

Accepted Answer

$$p = 2$$

Question 12

Which of the following would cause a movement along the demand curve for coffee, rather than a shift of the curve?

Accepted Answer

A decrease in the price of coffee

Question 13

If the government collects a specific tax from consumers instead of producers, what happens to the equilibrium outcome?

Accepted Answer

The equilibrium price and quantity are the same as if the tax were collected from producers

Question 14

Which of the following is an example of a government policy that shifts the demand curve to the left?

Accepted Answer

Banning the sale of a good to a segment of consumers

Question 15

If the price of coffee is set at $$3$$ per lb, but the equilibrium price is $$2$$ per lb, what will happen in the market?

Accepted Answer

There will be excess supply (surplus) of coffee

Question 16

Which of the following best describes the effect of a technological improvement in coffee production?

Accepted Answer

The supply curve shifts to the right

Question 17

If the government imposes a price floor below the equilibrium price, what is the effect on the market?

Accepted Answer

No effect; the market equilibrium prevails

Question 18

Which of the following statements about tax incidence is correct?

Accepted Answer

The burden of a sales tax is typically shared between consumers and producers

Question 19

If the market for coffee is in equilibrium and the government suddenly restricts the amount of imported coffee, what is the likely effect?

Accepted Answer

The supply curve shifts to the left, raising equilibrium price and lowering equilibrium quantity

Supply and Demand: Foundations, Shocks, and Government Intervention

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