MicroEcon 1 - Demand and Supply

In a market economy, supply and demand are important because they

• play a critical role in the allocation of the economy’s scarce resources.

• determine how much of each good gets produced.

• can be used to predict the impact on the economy of various events and policies.

• All of the above are correct.

A competitive market is one in which there

• is only one seller, but there are many buyers.

• are many sellers, and each seller has the ability to set the price of his product.

• are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market.

• are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world?

• Perfectly competitive markets are the easiest to analyze because everyone participating in the market takes the price as given by market conditions.

• Some degree of competition is present in most markets.

• There are many buyers and many sellers in all types of markets.

• Many of the lessons that we learn by studying supply and demand under perfect competition apply in more complicated markets as well.

The quantity demanded of a good is the amount that buyers are

• willing to purchase.

• willing and able to purchase.

• willing, able, and need to purchase.

• able to purchase.

Which of these statements best represents the law of demand?

• When buyers’ tastes for a good increase, they purchase more of the good.

• When income levels increase, buyers purchase more of most goods.

• When the price of a good decreases, buyers purchase more of the good.

• When buyers’ demands for a good increase, the price of the good increases.

At a price of $35, there would be a

• a shortage, and the price would tend to rise from $35 to a higher price.

• a surplus, and the price would tend to rise from $35 to a higher price.

• excess demand, and the price would tend to fall from $35 to a lower price.

• excess supply, and the price would tend to fall from $35 to a lower price.

Equilibrium price and quantity are, respectively,

• $15 and 200 units.

• $25 and 600 units.

• $25 and 400 units.

• $35 and 200 units.

Workers at a bicycle assembly plant currently earn the mandatory minimum wage.  If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the

• demand for bicycle assembly workers will increase.

• supply of bicycles will shift to the right.

• supply of bicycles will shift to the left.

• firm must increase output to maintain profit levels.

If car manufacturers begin using new labor-saving technology on their assembly lines, we would not expect

• a smaller quantity of labor to be used.

• the supply of cars to increase.

• the firms’ costs to fall.

• individual car manufacturers to move up and to the right along their individual supply curves.

Which of the four panels represents the market for cars as a result of the adoption of new technology on assembly lines?

• 
• 
• 
•