Demand and Supply: The Forces Shaping Markets

Question 1

The law of supply states that:

Accepted Answer

As the price of a good increases, the quantity supplied of that good will also increase.

Answer

As the price of a good decreases, the quantity supplied of that good will also increase.

Answer

As the price of a good increases, the quantity demanded of that good will also increase.

Answer

As the price of a good decreases, the quantity demanded of that good will also increase.

Question 2

At the market equilibrium price:

Accepted Answer

The quantity demanded is equal to the quantity supplied

Answer

The quantity demanded is less than the quantity supplied

Answer

The quantity supplied is less than the quantity demanded

Answer

The price ceiling is equal to the price floor

Question 3

Which of the following government interventions is designed to increase the quantity supplied of a particular good?

Accepted Answer

Subsidy

Answer

Price ceiling

Answer

Price floor

Answer

Tax

Question 4

What would be the effect of imposing a price ceiling below the equilibrium price?

Accepted Answer

Create a shortage in the market

Answer

Create a surplus in the market

Answer

Have no significant impact on the market

Answer

Increase consumer welfare

Question 5

Which of the following factors would cause a shift in the demand curve to the right?

Accepted Answer

An increase in the number of buyers in the market

Answer

An increase in the price of a complementary good

Answer

A decrease in consumer income

Answer

A decrease in consumer tastes and preferences for the good

Question 6

Which of the following goods would most likely exhibit a high elasticity of supply?

Accepted Answer

Agricultural products

Answer

Luxury cars

Answer

Artwork

Answer

Real estate

Question 7

What is the equilibrium price?

Accepted Answer

The price at which the quantity demanded is equal to the quantity supplied, creating market equilibrium.

Answer

The highest price consumers are willing to pay for a good or service, regardless of quantity.

Answer

The lowest price producers are willing to accept for a good or service, regardless of quantity.

Answer

The price set by the government to ensure a fair market for buyers and sellers.

Question 8

What is the purpose of a subsidy?

Accepted Answer

To increase the quantity supplied by making it more profitable for producers to produce the good or service.

Answer

To decrease the quantity demanded by making it more expensive for consumers to purchase the good or service.

Answer

To set a minimum price for a good or service.

Answer

To eliminate competition in a market.

Question 9

What is the concept of elasticity of demand?

Accepted Answer

A measure of how responsive the quantity demanded is to changes in price.

Answer

A measure of how responsive the quantity supplied is to changes in price.

Answer

A measure of the slope of the demand curve.

Answer

A measure of the slope of the supply curve.

Question 10

Which demand curve is perfectly elastic?

Accepted Answer

A horizontal line.

Answer

A vertical line.

Answer

An upward-sloping line.

Answer

A downward-sloping line.

Question 11

What is the impact of a technological advancement on the supply curve?

Accepted Answer

It shifts the supply curve to the right, increasing supply.

Answer

It shifts the supply curve to the left, reducing supply.

Answer

It does not affect the supply curve.

Answer

It shifts the demand curve.

Question 12

Which of the following is NOT a type of market structure?

Accepted Answer

Bilateral Monopoly

Answer

Perfect competition

Answer

Monopoly

Answer

Oligopoly

Question 13

A price ceiling is likely to cause:

Accepted Answer

Decreased supply and increased demand

Answer

Increased supply and increased demand

Answer

Increased supply and decreased demand

Answer

Decreased supply and decreased demand

Question 14

The point at which the demand curve and supply curve intersect is referred to as:

Accepted Answer

Equilibrium point

Answer

Excess demand point

Answer

Excess supply point

Answer

Disequilibrium point

Question 15

A subsidy on a product will:

Accepted Answer

Increase demand and increase supply

Answer

Increase demand and decrease supply

Answer

Decrease demand and increase supply

Answer

Decrease demand and decrease supply

Question 16

Which of the following characterizes a perfectly elastic demand curve?

Accepted Answer

Horizontal

Answer

Vertical

Answer

Positively sloped

Answer

Negatively sloped

Question 17

The Law of Demand states that:

Accepted Answer

As price increases, quantity demanded decreases

Answer

As price decreases, quantity demanded increases

Answer

As price increases, quantity demanded increases

Answer

As price decreases, quantity demanded decreases

Question 18

Which of the following is a primary objective of government intervention in markets?

Accepted Answer

To correct market failures and promote efficiency

Answer

To reduce consumer surplus and protect producers

Answer

To increase government revenue and control the economy

Answer

To eliminate competition and create monopolies

Question 19

Which of the following is not a factor that affects supply?

Accepted Answer

Number of consumers in the market

Answer

Cost of production

Answer

Technological advancements

Answer

Government regulations

Question 20

If supply increases while demand remains constant, what happens to the equilibrium price?

Accepted Answer

Decreases

Answer

Increases

Answer

Remains the same

Answer

Cannot be determined

Question 21

How will a tax imposed on producers affect the supply curve?

Accepted Answer

Shifts to the left

Answer

Shifts to the right

Answer

Remains unchanged

Answer

Becomes vertical

Question 22

Which scenario represents a price elasticity of demand of -1?

Accepted Answer

A 10% price increase results in a 10% decrease in quantity demanded

Answer

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

Answer

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

Answer

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

Question 23

What is the expected change in demand if a good has a high income elasticity of demand and income increases?

Accepted Answer

Increase

Answer

Decrease

Answer

Remain unchanged

Answer

Cannot be determined

Question 24

According to the law of demand, what is the relationship between price and quantity demanded for a normal good?

Accepted Answer

Negative

Answer

Positive

Answer

No relationship

Answer

Depends on the specific good

Question 25

In a free market, what occurs at the equilibrium price?

Accepted Answer

Quantity supplied equals quantity demanded

Answer

Price is at its maximum

Answer

Quantity demanded is at its maximum

Answer

Producers earn the highest profits

Question 26

What is a potential consequence of a price ceiling set below the equilibrium price?

Accepted Answer

Shortage

Answer

Surplus

Answer

Increased consumer surplus

Answer

Higher producer profits

Question 27

Which of the following is a potential benefit of a price floor?

Accepted Answer

Increased producer income

Answer

Lower consumer prices

Answer

Reduced market competition

Answer

Elimination of market surpluses

Question 28

Which of the following scenarios typically results in an elastic demand curve?

Accepted Answer

Product has many close substitutes

Answer

Product has few substitutes

Answer

Product is a necessity

Answer

Product is purchased infrequently

Question 29

What is the primary objective of economic analysis?

Accepted Answer

Understand the behavior of markets and economic agents

Answer

Maximize profits for businesses

Answer

Predict future economic performance with certainty

Answer

Provide solutions to all economic problems

Question 30

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Firms that influence market price

Answer

Numerous buyers and sellers

Answer

Identical products

Answer

Unrestricted entry and exit

Question 31

If the supply of a product increases and demand remains constant, what will happen to the equilibrium price and quantity in the market?

Accepted Answer

Price will decrease, quantity will increase

Answer

Price will increase, quantity will increase

Answer

Price will decrease, quantity will decrease

Answer

Price will increase, quantity will decrease

Question 32

Which of the following is an example of a substitute good?

Accepted Answer

Coffee and tea

Answer

Pencils and erasers

Answer

Cars and gasoline

Answer

Bread and butter

Question 33

What is the primary objective of implementing a price floor?

Accepted Answer

To protect producers from low prices

Answer

To increase consumer surplus

Answer

To reduce market equilibrium quantity

Answer

To create artificial scarcity

Question 34

In a perfectly competitive market, which of the following statements is accurate?

Accepted Answer

Consumers have perfect information.

Answer

Producers have significant market power.

Answer

High barriers to entry and exit exist.

Answer

Prices are determined through negotiations between buyers and sellers.

Question 35

How would a shift in consumer preferences towards healthier food products affect the demand for fast food? Provide specific examples to support your answer.

Accepted Answer

Demand for fast food would decrease as consumers become more health-conscious.

Answer

Demand for fast food would increase as consumers become more health-conscious.

Answer

Supply for fast food would increase as consumers become more health-conscious.

Answer

Supply for fast food would decrease as consumers become more health-conscious.

Question 36

Which of the following scenarios would result in both a higher equilibrium price and a greater equilibrium quantity of a good?

Accepted Answer

A rise in demand accompanied by a rise in supply

Answer

A rise in demand accompanied by a fall in supply

Answer

A rise in supply accompanied by a fall in demand

Answer

A fall in demand caused by a rise in the price of a substitute

Question 37

Which of the following is a determinant of demand that reflects consumer preferences?

Accepted Answer

Consumer tastes and preferences

Answer

Quantity of producers in the market

Answer

Government regulations on production

Answer

Price of a complementary good

Question 38

When supply exceeds demand, which of the following is most likely to occur?

Accepted Answer

Prices will fall

Answer

Prices will rise

Answer

Quantity supplied will decrease

Answer

Quantity demanded will increase

Question 39

A price ceiling set below the equilibrium price will result in:

Accepted Answer

Shortage

Answer

Surplus

Answer

Increase in both supply and demand

Answer

No change in market equilibrium

Question 40

A subsidy on a good will most likely lead to:

Accepted Answer

Increase in quantity supplied

Answer

Increase in price

Answer

No effect on equilibrium quantity

Answer

Decrease in quantity demanded

Question 41

The law of diminishing marginal utility states that:

Accepted Answer

As consumption of a good increases, the additional satisfaction (utility) derived from each additional unit decreases.

Answer

As the price of a good increases, the quantity demanded decreases.

Question 42

Which of the following will lead to a shift in the supply curve to the right?

Accepted Answer

Technological advancements that reduce production costs

Answer

Higher production costs

Answer

Increased demand

Answer

Government taxes

Question 43

What is the relationship between price elasticity of demand and total revenue?

Accepted Answer

For elastic goods, total revenue decreases with a price increase; for inelastic goods, total revenue increases with a price increase.

Answer

Elasticity has no effect on total revenue.

Question 44

What is the primary role of equilibrium in a market economy?

Accepted Answer

To determine the price and quantity that balance supply and demand, efficiently allocating resources.

Answer

To guarantee maximum profits for producers

Question 45

Which of the following events would lead to a decrease in both the quantity supplied and the quantity demanded of a good?

Accepted Answer

A recession causing a decline in consumer income and business investment.

Answer

A technological advancement that lowers production costs.

Answer

An increase in consumer confidence leading to higher spending.

Answer

A government subsidy provided to producers of the good.

Question 46

If a government imposes a price ceiling below the equilibrium price of a good, what is the likely outcome?

Accepted Answer

Excess demand and shortages, leading to potential black markets and rationing.

Answer

No significant change in the market, as the price ceiling is ineffective.

Answer

An increase in both supply and demand, as consumers seek out the lower price.

Answer

Excess supply and surpluses, resulting in lower prices for producers.

Question 47

Which of the following factors directly influences the demand for a product?

Accepted Answer

Consumer income, as higher income often leads to increased demand for goods and services.

Answer

Producer technology, which influences production costs and supply.

Answer

Number of sellers in the market, which affects competition and supply.

Answer

Government regulations, which primarily affect the supply side of the market.

Question 48

How does the elasticity of demand relate to the law of demand?

Accepted Answer

The law of demand states that quantity demanded generally decreases as price increases. Elasticity measures how much quantity demanded changes in response to price changes, indicating the sensitivity of demand.

Answer

The elasticity of demand is not related to the law of demand. They are separate concepts.

Answer

The law of demand states that demand is constant for a given price, while elasticity measures how demand changes with price.

Question 49

What is the effect of a government subsidy on the supply curve for a good?

Accepted Answer

It shifts the supply curve to the right, indicating an increase in supply due to lower production costs for suppliers.

Answer

It shifts the supply curve to the left, indicating a decrease in supply due to the cost of the subsidy.

Answer

It has no effect on the supply curve, as subsidies are not related to production costs.

Answer

It increases the elasticity of supply, making suppliers more responsive to price changes.

Question 50

Which of the following is a defining characteristic of a perfectly competitive market?

Accepted Answer

Many buyers and sellers, with no single participant having significant market power to influence prices.

Answer

Price discrimination, where sellers charge different prices to different buyers.

Answer

Barriers to entry, making it difficult for new firms to enter the market.

Question 51

In a free market, what is the equilibrium price?

Accepted Answer

The price at which the quantity of a good that buyers are willing to purchase (demand) equals the quantity that sellers are willing to offer (supply).

Answer

The price set by the government through regulation or intervention.

Answer

The lowest price at which a producer is willing to sell, regardless of market demand.

Question 52

Which of the following factors is most likely to shift the demand curve for gasoline to the left?

Accepted Answer

A widespread shift in consumer preferences towards electric vehicles, reducing demand for gasoline-powered cars.

Answer

Changes in consumer income, which can affect demand for gasoline, but not necessarily cause a leftward shift.

Answer

Changes in the price of oil, which primarily affect the supply of gasoline.

Question 53

What has been the primary impact of technological advancements on the market for smartphones?

Accepted Answer

It has led to increased production of smartphones at lower costs, resulting in a significant increase in supply and a decrease in price.

Answer

It has slowed down production and increased costs, leading to a decrease in supply and an increase in price.

Answer

It has had little impact on the market, as technological advancements are not directly related to supply and demand.