Practice Questions
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What is producer surplus in the context of demand and supply?
Producer surplus is the extra money producers get when the market price is higher than the lowest price they would accept. Other options are incorrect...
Which of the following scenarios best illustrates how both demand and supply factors can influence the price of a product in a competitive market?
When people earn more, they want more luxury cars. Other options are incorrect because This example only shows a price drop leading to more coffee use...
How does an increase in the price of a good affect producer surplus, according to the law of supply?
When the price of a good goes up, producers can sell each unit for more than the lowest price they would accept. Other options are incorrect because S...
If the demand for a product is elastic and the supply curve shifts to the left due to increased production costs, what is the likely outcome for the equilibrium price and quantity?
When supply moves left, fewer goods are available. Other options are incorrect because Some think a leftward supply shift lowers price because fewer g...
How does the law of supply interact with the price elasticity of demand to affect market equilibrium when a price increase occurs?
When the price of a good rises, sellers want to produce more. Other options are incorrect because Some think that a higher price makes sellers supply ...
A local bakery is experiencing a surge in demand for its specialty cakes due to a recent social media trend. The owner decides to increase the price of the cakes to capitalize on this demand. What is the likely economic outcome of this decision in terms of supply and demand principles?
Raising the price gives the bakery more money per cake. Other options are incorrect because People usually buy less when a product costs more; Even th...
In the context of demand and supply, the principle that states that as the price of a good increases, the quantity demanded decreases is known as the law of ______.
The law of demand says that when a price goes up, people buy less of that item. Other options are incorrect because Supply talks about how many seller...
Which of the following statements correctly describe the relationship between demand and supply in a market economy? (Select all that apply)
When supply rises, sellers have more goods, so the price falls. Other options are incorrect because The mistake is thinking demand moves the supply cu...
If the price of oranges increases significantly, what is the most likely effect on the quantity of oranges demanded by consumers?
When oranges cost more, people usually buy fewer of them. Other options are incorrect because Some think a higher price makes oranges more desirable, ...
Arrange the following steps in the correct order to illustrate the impact of a price increase on the market equilibrium for a product: A) Suppliers increase the quantity supplied, B) Price rises, C) Demand decreases, D) Market reaches a new equilibrium.
When the price goes up, sellers see a chance to earn more and they raise how much they sell. Other options are incorrect because This option assumes b...
Demand is to price as supply is to what?
Supply is the amount that sellers are willing to give at a certain price. Other options are incorrect because Profit margin is the extra money sellers...
If the price of a popular smartphone decreases, what is the likely impact on its demand and supply?
When the price goes down, people can buy more phones because they are cheaper. Other options are incorrect because Some think that cheaper phones make...
Which of the following scenarios best illustrates the law of demand?
When the price of coffee goes up, people buy less of it. Other options are incorrect because This mixes up demand with supply; This talks about income...
How does a decrease in consumer income typically affect the demand for inferior goods?
When people have less money, they look for cheaper options. Other options are incorrect because Some think less money means buying less overall; The i...
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