AP Micro Microeconomics: Supply and Demand 2

Question 1

A simultaneous decrease in both supply and demand for a good will definitely cause:

Accepted Answer

Equilibrium quantity to fall

Answer

When both supply and demand decrease, quantity falls unambiguously, but the price change is indeterminate without knowing the relative magnitudes.

Question 2

If the price of steel rises significantly, what happens in the automobile market?

Accepted Answer

Supply of cars decreases

Answer

Steel is an input for automobiles, so a higher steel price raises production costs and shifts the supply curve for cars leftward (decreases supply).

Question 3

A binding price floor set above the equilibrium price results in:

Accepted Answer

A surplus of the good

Answer

A price floor above equilibrium keeps the price artificially high, causing quantity supplied to exceed quantity demanded, creating a surplus.

Question 4

Which scenario best illustrates a movement along the demand curve rather than a shift of the demand curve?

Accepted Answer

A good's own price rises, causing consumers to buy less

Answer

A change in a good's own price causes movement along the existing demand curve, while all other factors shift the curve itself.

Question 5

In a competitive market, if quantity demanded exceeds quantity supplied at the current price, we would expect:

Accepted Answer

The price to rise until a new equilibrium is reached

Answer

A shortage (excess demand) creates upward pressure on price as buyers compete for scarce goods, driving price toward equilibrium.

AP Practice Test