Question 1

When evaluating the difference between an increase in supply and an increase in quantity supplied, which of the following is correct?

Accepted Answer

The former is a shift of the supply curve and the latter is a movement along the curve.

Question 2

Suppose the market demand for a product is given by $$Q_d = 200 - 3P$$ and the market supply is $$Q_s = 2P + 100. $$What is the equilibrium price and quantity in this market?

Accepted Answer

Price is $$20$$ and quantity is $$140.$$

Question 3

If the price of gum is $$0.70$$ per pack, and at this price, the quantity supplied exceeds the quantity demanded, what will happen in the gum market?

Accepted Answer

There will be a surplus, causing the price to fall.

Question 4

What is another term for equilibrium price?

Accepted Answer

Market-clearing price

Question 5

Why do markets tend to move toward equilibrium of supply and demand?

Accepted Answer

Because of the actions of buyers and sellers

Question 6

If there is a surplus in a market, what happens?

Accepted Answer

There is downward pressure on price.

Question 7

If a shortage exists in a market, what do we know?

Accepted Answer

The actual price is below equilibrium price, and quantity demanded is greater than quantity supplied.

Question 8

If the supply of a product increases, what would we expect to happen to equilibrium price and quantity?

Accepted Answer

Equilibrium price to decrease and equilibrium quantity to increase.

Question 9

Which of the following would cause both the equilibrium price and equilibrium quantity of number two grade potatoes (an inferior good) to increase?

Accepted Answer

A decrease in consumer income

Question 10

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, autoworkers accept lower wages, and automobile insurance becomes more expensive?

Accepted Answer

Price change will be ambiguous

Question 11

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have risen over time. Which of the following would be most consistent with this observation?

Accepted Answer

Consumers have experienced an increase in income and beef-production technology has improved.

Question 12

What are the signals that guide the allocation of resources in a market economy?

Accepted Answer

Prices

Question 13

Alyssa rents five movies per month when the price is $$3.00$$ each and seven movies per month when the price is $$2.50. $$What has Alyssa demonstrated?

Accepted Answer

Law of demand

Question 14

Suppose the market demand is $$Q_d = 60 - P$$ and the market supply is $$Q_s = 3P. In a $$perfectly competitive equilibrium, what will be the price and quantity traded in the market?

Accepted Answer

Price is $$15$$ and quantity is $$45.$$

Question 15

If the price of gum is $$0.30$$ per pack, and at this price, the quantity demanded exceeds the quantity supplied, what will happen in the gum market?

Accepted Answer

There will be a shortage, causing the price to rise.

Question 16

Suppose the market demand is $$Q_d = 200 - 3P$$ and the market supply is $$Q_s = 2P + 100. $$What would result if the market price were $$30$$?

Accepted Answer

There would be a shortage of $$40$$ units.

Question 17

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

Accepted Answer

The supply curve shifts to the right.

Question 18

If the price of a substitute good increases, what is the likely effect on the demand for the original good?

Accepted Answer

Demand for the original good will increase.

Question 19

If the government imposes a price ceiling below the equilibrium price, what is the likely result?

Accepted Answer

A shortage will occur.

Question 20

In the context of the popcorn market, if the price of field corn rises due to increased demand for animal feed and ethanol, what is the likely effect on the supply of popcorn?

Accepted Answer

The supply of popcorn will decrease.

Weekly Assignment 2 Supply, Demand, and Market Equilibrium: Microeconomics Study Guide

Study Guide - Practice Questions

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