Microeconomics Chapter 4: 1 - 15

The key condition for equilibrium to occur in a market is:

• the demand curve equals the supply curve

• quantity demanded equals quantity supplied

• price equals quantity

• demand for one good equals demand for all other goods

(Figure: Equilibrium) Refer to the figure. The equilibrium quantity (in units) is:

• 8

• 10

• 16

• 12

A market can be described by the equations Qd = 50 – 3P and Qs = 2P. What are the equilibrium price and quantity in this market?

• The equilibrium price is $20, and the equilibrium quantity is 10 units

• The equilibrium price is $50, and the equilibrium quantity is 100 units

• The equilibrium price is $30, and the equilibrium quantity is 10 units

• The equilibrium price is $10, and the equilibrium quantity is 20 units

(Figure: Market Equilibrium) Refer to the figure. At a price of $1, the market is characterized by a(n):

• excess supply of 2 units

• excess demand of 4 units

• surplus of 4 units

• shortage of 6 units

Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units, and sellers are willing and able to sell 70 units. Which of the following statements are TRUE?

• There is a shortage of 30 units

• The market is in equilibrium

• The price in the market will decrease

• Quantity demanded will increase

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

• the equilibrium price will fall to $7.50

• competition among buyers will increase the current price

• the current price will fall below $7.50 as sellers compete for market share

• the quantity demanded in the market will decrease until current market price falls

In free markets, surpluses lead to:

• lower prices

• higher prices

• stable prices

• unexploited gains from trade

(Table: Equilibrium Price, Quantity) Refer to the table. The equilibrium P and Q are:

• $10 and 50

• $12 and 35

• $40 and 14

• $14 and 40

(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

• shortage of 10 units

• shortage of 45 units

• surplus of 10 units

• surplus of 35 units

For each good produced in a free market economy, demand and supply determine:

• the price of the good, but not the quantity

• the quantity of the good, but not the price

• both the price and the quantity of the good

• neither price nor quantity; sellers determine the price