Demand and Supply: The Forces Shaping Market Prices

Question 1

How does a technological advancement in production affect the supply curve?

Accepted Answer

Shifts the curve to the right, increasing the quantity supplied at each price level

Answer

Shifts the curve to the left, reducing the quantity supplied at each price level

Answer

Increases the slope of the curve, making supply more responsive to price changes

Answer

Decreases the slope of the curve, making supply less responsive to price changes

Question 2

At the point of market equilibrium, what is the relationship between quantity supplied and quantity demanded?

Accepted Answer

They are equal, satisfying the needs of both producers and consumers

Answer

Quantity supplied is greater than quantity demanded, resulting in a surplus

Answer

Quantity demanded is greater than quantity supplied, resulting in a shortage

Answer

Both quantities are zero, indicating no market activity

Question 3

Which government intervention sets a maximum price below the equilibrium price, potentially leading to a shortage?

Accepted Answer

Price ceiling

Answer

Price floor

Answer

Subsidy

Answer

Tax

Question 4

Calculate the price elasticity of demand if a 10% increase in price results in a 5% decrease in quantity demanded.

Accepted Answer

0.5

Answer

1

Answer

2

Answer

5

Question 5

How might a natural disaster, such as a hurricane, affect the supply of agricultural products?

Accepted Answer

Shift the supply curve to the left, reducing the quantity supplied at each price level

Answer

Shift the supply curve to the right, increasing the quantity supplied at each price level

Answer

Increase the elasticity of supply, making supply more responsive to price changes

Answer

Decrease the elasticity of supply, making supply less responsive to price changes

Question 6

Which combination of demand and supply shifts can lead to a market surplus?

Accepted Answer

An increase in supply and a decrease in demand

Answer

An increase in demand and an increase in supply

Answer

A decrease in demand and a decrease in supply

Answer

A decrease in demand and an increase in supply

Question 7

In a free market economy, what is the primary function of prices?

Accepted Answer

To allocate resources efficiently, guiding production and consumption decisions

Answer

To ensure equal distribution of goods and services among all citizens

Answer

To prevent businesses from gaining too much market power

Answer

To protect consumers from fraudulent or harmful products

Question 8

At the equilibrium point in a market, the:

Accepted Answer

Quantity demanded equals the quantity supplied

Answer

Quantity demanded exceeds the quantity supplied

Answer

Quantity supplied exceeds the quantity demanded

Answer

Price is at its highest point

Question 9

An example of a good with a price elasticity of demand greater than 1 is:

Accepted Answer

A 5% decrease in the price leads to a 10% increase in quantity demanded

Answer

A 10% increase in the price leads to a 5% decrease in quantity demanded

Answer

A 10% increase in the price leads to a 10% decrease in quantity demanded

Answer

A 5% decrease in the price leads to a 5% increase in quantity demanded

Question 10

A shift in the demand curve to the left suggests a decrease in demand. Which factor is MOST LIKELY responsible for this shift?

Accepted Answer

Lower consumer income

Answer

Higher price of a substitute good

Answer

Higher price of the good itself

Question 11

Which factor would most likely increase the demand for gasoline?

Accepted Answer

A rise in the price of public transportation

Answer

A decrease in the price of gasoline

Answer

An increase in the number of electric vehicles

Answer

A government subsidy for fuel-efficient vehicles

Question 12

What is the expected outcome if the government sets a price ceiling below the equilibrium price for a good?

Accepted Answer

Shortages and black markets will occur.

Answer

Consumers will purchase more of the good than they need.

Answer

Producers will increase output to meet increased demand.

Answer

The price will naturally rise to the equilibrium price.

Question 13

Which of the following goods is likely to have a perfectly inelastic demand?

Accepted Answer

Salt

Answer

Electronics

Answer

Luxury cars

Answer

Gasoline

Question 14

What is the primary factor that determines the shape of the demand curve?

Accepted Answer

Preferences of consumers

Answer

Cost of production

Answer

Government regulations

Answer

Weather conditions

Question 15

Which of the following is not a determinant of demand?

Accepted Answer

Technological advancement in production

Answer

Consumer preferences

Answer

Consumer income

Answer

Price of the good itself

Question 16

A decrease in the supply of a commodity will lead to:

Accepted Answer

Higher equilibrium price and lower equilibrium quantity

Answer

Lower equilibrium price and higher equilibrium quantity

Answer

Higher equilibrium price and higher equilibrium quantity

Answer

Lower equilibrium price and lower equilibrium quantity

Question 17

Which of the following represents a price ceiling?

Accepted Answer

Rent control

Answer

Minimum wage

Answer

Tax on imported goods

Answer

Sales tax

Question 18

Consumer surplus is defined as:

Accepted Answer

The difference between the price consumers pay and the price they are willing to pay

Answer

The difference between the quantity consumers demand and the quantity they supply

Answer

The total revenue earned by producers

Answer

The total cost incurred by consumers

Question 19

How does a technological advancement that lowers production costs affect the market?

Accepted Answer

Shifts the supply curve rightward

Answer

Shifts the demand curve leftward

Answer

Shifts both demand and supply curves rightward

Answer

Has no impact on market equilibrium

Question 20

Which is not an assumption of a perfectly competitive market?

Accepted Answer

Significant market power for individual entities

Answer

Perfect information for buyers and sellers

Answer

Identical products

Answer

Numerous buyers and sellers

Question 21

An increase in demand for a normal good will:

Accepted Answer

Raise both equilibrium price and quantity

Answer

Lower both equilibrium price and quantity

Answer

Raise only equilibrium price

Answer

Lower only equilibrium quantity

Question 22

A price reduction for a commodity will result in:

Accepted Answer

Increased quantity demanded and supplied

Answer

Reduced quantity demanded and supplied

Answer

Increased quantity demanded but reduced quantity supplied

Answer

Reduced quantity demanded but increased quantity supplied

Question 23

Which factors will cause a rightward shift of the supply curve?

Accepted Answer

Advancements in technology

Accepted Answer

Increase in the number of firms in the industry

Answer

Increase in the price of a substitute good

Answer

Increase in consumer demand

Question 24

In a market where demand exceeds supply, what will happen to the equilibrium price?

Accepted Answer

Increase

Answer

Decrease

Answer

Remain the same

Answer

Fluctuate randomly

Question 25

When the government imposes a price ceiling below the equilibrium price, what will likely occur in the market?

Accepted Answer

Shortage

Answer

Surplus

Answer

Equilibrium

Answer

Inefficiency

Question 26

A perfectly elastic demand curve is represented by a:

Accepted Answer

Horizontal line

Answer

Vertical line

Answer

Downward-sloping line

Answer

Upward-sloping line

Question 27

Which of the following is a primary determinant of the slope of the supply curve?

Accepted Answer

Technology

Answer

Availability of resources

Answer

Consumer preferences

Answer

Number of producers

Question 28

When there is a technological advancement in production, what will likely happen to the supply?

Accepted Answer

Increase

Answer

Decrease

Answer

Remain the same

Answer

Fluctuate

Question 29

The law of diminishing marginal utility suggests that as more units of a good are consumed, the:

Accepted Answer

Marginal utility decreases

Answer

Marginal utility increases

Answer

Marginal utility remains constant

Answer

Marginal utility fluctuates

Question 30

Which of the following is NOT a characteristic of a free market economy?

Accepted Answer

Significant government intervention

Answer

Private ownership of property

Answer

Consumer sovereignty

Answer

Competition

Question 31

How does a government subsidy that lowers the production costs of domestic producers impact the market?

Accepted Answer

Increases supply and increases demand

Answer

Increases supply and decreases demand

Answer

Decreases supply and decreases demand

Answer

Decreases supply and increases demand

Question 32

Which of the following factors CANNOT affect the position of the demand curve?

Accepted Answer

Government intervention

Answer

Change in consumer tastes and preferences

Answer

Change in the price of a related good

Answer

Change in consumer income

Question 33

If the supply of a product decreases, what will happen to its equilibrium price and quantity?

Accepted Answer

Equilibrium price increases; equilibrium quantity decreases

Answer

Equilibrium price increases; equilibrium quantity increases

Answer

Equilibrium price decreases; equilibrium quantity decreases

Answer

Equilibrium price decreases; equilibrium quantity increases

Question 34

Which of the following is an example of a price ceiling?

Accepted Answer

Rent control

Answer

Minimum wage laws

Answer

Government subsidies

Answer

Luxury taxes

Question 35

What is meant by the law of diminishing marginal utility?

Accepted Answer

As consumers buy more of a product, they derive less additional satisfaction from each additional unit.

Answer

As the price of a product increases, consumers will buy less of it.

Answer

Total utility increases as more of a product is consumed.

Answer

Marginal utility is always positive regardless of the quantity consumed.

Question 36

What is the impact of a decrease in demand on the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases; equilibrium quantity decreases

Answer

Equilibrium price decreases; equilibrium quantity increases

Answer

Equilibrium price increases; equilibrium quantity decreases

Answer

Equilibrium price increases; equilibrium quantity increases

Question 37

Which of the following is NOT a factor that affects the elasticity of supply?

Accepted Answer

Consumer preferences

Answer

Availability of inputs

Answer

Production technology

Answer

Time horizon

Question 38

What is the graphical representation of the relationship between price and quantity demanded?

Accepted Answer

Demand curve

Answer

Supply curve

Answer

Marginal cost curve

Answer

Total revenue curve

Question 39

How do technological advancements impact the supply of a product, and how might this influence consumer behavior?

Accepted Answer

Increase supply, lower prices, and boost consumption.

Answer

Decrease supply, raise prices, and reduce consumption.

Answer

Have no effect on supply or consumer choices.

Question 40

How does a decrease in supply impact consumer surplus, which measures the difference between the price consumers are willing to pay and the actual price they pay?

Accepted Answer

Consumer surplus decreases.

Answer

Consumer surplus increases.

Answer

Consumer surplus stays the same.

Question 41

When the supply of a good increases, what happens to the equilibrium price?

Accepted Answer

Declines

Answer

Increases

Answer

Stays the same

Answer

Becomes negative

Question 42

Which of the following would result from a government-imposed price ceiling below the equilibrium price?

Accepted Answer

Shortage

Answer

Increased consumer demand

Answer

Equilibrium

Answer

Surplus

Question 43

Which of the following factors would cause a decrease in the demand for a normal good?

Accepted Answer

Fall in income

Answer

Rise in the price of a complementary good

Answer

Technological improvements in production

Answer

Increase in population

Question 44

In a competitive market, when the equilibrium price is higher than the average variable cost, businesses will:

Accepted Answer

Enter the market

Answer

Increase prices

Answer

Reduce production

Answer

Leave the market

Question 45

Which of the following actions will NOT increase the elasticity of supply?

Accepted Answer

Limiting the number of suppliers

Answer

Extending production capacity

Answer

Removing barriers to entry

Answer

Introducing more efficient production methods

Question 46

When a technological advancement reduces the cost of producing a good, what is the probable effect on the supply curve?

Accepted Answer

Rightward shift

Answer

Leftward shift

Answer

Downward shift

Answer

Upward shift

Question 47

Which of the following government policies aims to boost production?

Accepted Answer

Expansionary fiscal policy

Answer

Tax on consumers

Answer

Contractionary monetary policy

Answer

Price floor

Question 48

What is the effect on the equilibrium price when the supply of a good increases?

Accepted Answer

Equilibrium price decreases

Answer

Equilibrium quantity increases

Answer

Equilibrium quantity remains the same

Answer

Equilibrium price increases

Question 49

Which of the following is not a factor that can shift the supply curve?

Accepted Answer

Change in consumer tastes

Answer

Change in technology

Answer

Change in government regulations

Answer

Change in input prices

Question 50

At the equilibrium point:

Accepted Answer

Quantity demanded equals quantity supplied

Answer

Quantity supplied is maximized

Answer

Price is at its lowest possible level

Question 51

What is the result of a price ceiling set below the equilibrium price?

Accepted Answer

Shortage

Answer

Equilibrium

Answer

Price increase

Answer

Surplus

Question 52

Which of the following could contribute to a rise in the demand for a product?

Accepted Answer

Increase in consumer income

Answer

Decrease in technology

Answer

Decrease in price of substitute goods

Answer

Increase in supply of the good

Question 53

Which statement accurately describes the law of supply?

Accepted Answer

As price increases, producers are incentivized to supply more of the good

Answer

As price increases, consumers are incentivized to demand more of the good

Answer

As quantity supplied increases, the price of the good decreases

Answer

As quantity demanded increases, the price of the good decreases

Question 54

What is the impact of an advancement in production technology?

Accepted Answer

Shifts the supply curve to the right

Answer

Shifts the supply curve to the left

Answer

Shifts the demand curve to the left

Answer

Shifts the demand curve to the right

Question 55

Which condition is necessary for a surplus to exist in a market?

Accepted Answer

Quantity supplied exceeds quantity demanded

Answer

Demand is greater than supply

Answer

Price is too low

Answer

Price is too high

Question 56

How does price play a role in establishing market equilibrium?

Accepted Answer

It adjusts until quantity supplied equals quantity demanded

Answer

It ensures the highest possible revenue for producers

Answer

It guarantees a shortage