Principles Of Competitive Markets And Price Equilibrium Mastery Practice Tests

Question 1

In a perfectly competitive market with $N$ firms, if the market price is $P = 50$, and a single firm decides to increase its price to $P = 51$, what is the expected change in the quantity demanded for that specific firm's product, assuming full information and standardized goods?

Accepted Answer

The quantity demanded for that firm drops to zero.

Answer

The quantity demanded decreases by exactly 1 unit.

Answer

The quantity demanded remains unchanged due to brand loyalty.

Answer

The quantity demanded increases because the higher price signals higher quality.

Question 2

Given the individual demand functions for two consumers: $q_1 = 10 - 2P$ and $q_2 = 15 - 3P$. Calculate the market demand function $Q_D$ as a function of $P$.

Accepted Answer

Q_D = 25 - 5P

Question 3

If the price of a good increases from $P_1 = 10$ to $P_2 = 15$, and the quantity demanded falls from $Q_1 = 100$ to $Q_2 = 80$, this represents a shift of the entire demand curve to the left.

Accepted Answer

False

Answer

True

Question 4

Consider the demand function $Q_D = 100 - 4P$. If the price $P$ increases by $2$, what is the resulting change in the quantity demanded $\Delta Q_D$?

Accepted Answer

Option A

Answer

Option B

Answer

Option C

Answer

Option D

Question 5

Which of the following scenarios would cause the demand curve for a normal good to shift to the right?

Answer

An increase in consumer income

Answer

An increase in the price of a substitute good

Answer

A decrease in the number of buyers in the market

Answer

An expectation that the price of the good will fall in the future

Question 6

A market has a demand curve defined by $Q_D = 200 - 10P$. If the number of buyers in the market doubles, assuming individual demand remains constant, what is the new market demand equation?

Accepted Answer

Q_D = 400 - 20P

Question 7

If a good is classified as an 'inferior good', how does the demand curve respond to an increase in consumer income?

Accepted Answer

The demand curve shifts to the left.

Answer

The demand curve shifts to the right.

Answer

There is a movement downward along the demand curve.

Answer

There is no change in the demand curve.

Question 8

A firm's supply function is given by $Q_s = 5P - 20$. If the price of an input increases, causing the supply function to shift to $Q_s = 5P - 40$, calculate the change in quantity supplied at a price of $P = 10$.

Accepted Answer

20

Question 9

Given the market demand $Q_d = 100 - 2P$ and supply $Q_s = 20 + 2P$, determine the equilibrium price $P^*$ and quantity $Q^*$.

Accepted Answer

P = 20, Q = 60

Answer

P = 10, Q = 80

Answer

P = 30, Q = 40

Answer

P = 25, Q = 50

Question 10

In a market where $Q_d = 200 - 5P$ and $Q_s = 50 + 10P$, calculate the magnitude of the surplus if the market price is fixed at $P = 12$.

Accepted Answer

30

Question 11

If both demand and supply curves shift to the right, the equilibrium quantity $Q^*$ will definitely increase, but the effect on the equilibrium price $P^*$ is ambiguous.

Accepted Answer

True

Answer

False

Question 12

Which of the following events would cause a leftward shift in the supply curve for a manufactured good?

Answer

An increase in the price of raw materials used in production

Answer

A technological advancement that improves efficiency

Answer

The implementation of a new tax on the production of the good

Answer

A decrease in the number of sellers in the market

Question 13

Suppose the market is in equilibrium at $P = 50$. If a technological breakthrough shifts the supply curve to $Q_s = 2Q_{old}$, what is the new equilibrium price if the demand curve is $Q_d = 1000 - 10P$ and the original supply was $Q_s = 10P$?

Accepted Answer

33.33

Question 14

If the market price is currently below the equilibrium price, which of the following describes the market adjustment process?

Accepted Answer

A shortage exists, and the price will rise until $Q_d = Q_s$.

Answer

A surplus exists, and the price will fall until $Q_d = Q_s$.

Answer

The market is stable and no price change will occur.

Answer

The quantity supplied will decrease until it equals quantity demanded.

Question 15

Given a demand function $Q_d = 100 - 2P$ and a supply function $Q_s = 20 + 3P$, calculate the equilibrium price $P^*$ and the equilibrium quantity $Q^*$.

Accepted Answer

P^* = 16, Q^* = 68

Question 16

If the current market price is $P = 20$ for the functions $Q_d = 100 - 2P$ and $Q_s = 20 + 3P$, determine the state of the market.

Accepted Answer

A surplus of 20 units exists.

Answer

A shortage of 20 units exists.

Answer

A surplus of 60 units exists.

Answer

The market is in equilibrium.

Question 17

If both demand and supply curves shift to the right, the equilibrium quantity $Q^*$ will always increase, but the effect on the equilibrium price $P^*$ is ambiguous.

Accepted Answer

True

Answer

False

Question 18

Which of the following scenarios will cause the equilibrium price $P^*$ to increase, assuming standard upward-sloping supply and downward-sloping demand curves?

Answer

A decrease in the number of sellers in the market.

Answer

An increase in consumer preference for the good.

Answer

A technological improvement in production.

Answer

A decrease in the price of a substitute good.

Question 19

Suppose the demand function shifts from $Q_d = 100 - 2P$ to $Q_d' = 120 - 2P$. Calculate the change in equilibrium price $\Delta P^*$ if the supply function remains $Q_s = 20 + 3P$.

Accepted Answer

4

Question 20

If the price of an input used in production increases, how does this affect the market equilibrium?

Accepted Answer

The supply curve shifts left, increasing the equilibrium price and decreasing the equilibrium quantity.

Answer

The supply curve shifts right, decreasing the equilibrium price and increasing the equilibrium quantity.

Answer

The demand curve shifts left, decreasing both equilibrium price and quantity.

Answer

The demand curve shifts right, increasing both equilibrium price and quantity.

Principles Of Competitive Markets And Price Equilibrium Mastery Practice Tests

Practice Tests

Principles of Competitive Markets and Price Equilibrium Mastery

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