AP Macroeconomics Quiz: Market Equilibrium And Disequilibrium

What this quiz covers

This quiz focuses on Market Equilibrium And Disequilibrium, giving you a quick way to practice the rules, question types, and explanations that matter most for AP Macroeconomics.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

Question 1

1. Price will decrease, and quantity will decrease.
2. Price will increase, and quantity will increase.
3. Price will increase, and quantity will decrease. (correct answer)
4. Price will decrease, and quantity will increase.

Explanation: The destruction of forests represents a decrease in the availability of a key input for lumber production, which causes the supply curve for lumber to shift to the left. This results in a higher equilibrium price and a lower equilibrium quantity.

Question 2

1. The equilibrium quantity will increase. (correct answer)
2. The equilibrium quantity will decrease.
3. The equilibrium price will increase.
4. The equilibrium price will decrease.

Explanation: The new diet increases the demand for coffee (shifts demand right). The record harvest increases the supply of coffee (shifts supply right). Since both shifts lead to a larger quantity being exchanged, the equilibrium quantity will definitely increase. The effect on price is indeterminate because the demand increase pushes the price up while the supply increase pushes it down.

Question 3

1. Equilibrium price will increase, and the effect on equilibrium quantity is indeterminate.
2. Equilibrium price will decrease, and the effect on equilibrium quantity is indeterminate.
3. The effect on equilibrium price is indeterminate, and equilibrium quantity will increase. (correct answer)
4. The effect on equilibrium price is indeterminate, and equilibrium quantity will decrease.

Explanation: The subsidy to buyers increases demand (shifts right). The entry of new manufacturers increases supply (shifts right). Both shifts cause the equilibrium quantity to increase. However, the increase in demand puts upward pressure on price, while the increase in supply puts downward pressure on price, so the net effect on the equilibrium price is indeterminate.

Question 4

1. a lower equilibrium price and a higher equilibrium quantity.
2. a higher equilibrium price and an indeterminate change in equilibrium quantity. (correct answer)
3. a higher equilibrium price and a higher equilibrium quantity.
4. an indeterminate change in equilibrium price and a lower equilibrium quantity.

Explanation: The increase in demand (rightward shift) and the decrease in supply (leftward shift) both put upward pressure on the equilibrium price, so the price will definitely increase. The increase in demand tends to increase quantity, while the decrease in supply tends to decrease quantity, making the overall effect on equilibrium quantity indeterminate.

Question 5

1. Equilibrium price will fall, and equilibrium quantity will fall.
2. Equilibrium price will rise, and equilibrium quantity will fall.
3. Equilibrium price will rise, and equilibrium quantity will rise. (correct answer)
4. Equilibrium price will fall, and equilibrium quantity will rise.

Explanation: The government mandate increases the demand for ethanol, which in turn increases the demand for corn from ethanol producers. This is represented by a rightward shift of the demand curve for corn, leading to a higher equilibrium price and a higher equilibrium quantity.

Question 6

1. Equilibrium quantity will increase, and the effect on equilibrium price is indeterminate.
2. Equilibrium quantity will decrease, and the effect on equilibrium price is indeterminate. (correct answer)
3. Equilibrium price will decrease, and equilibrium quantity will decrease.
4. Equilibrium price will increase, and equilibrium quantity will decrease.

Explanation: The shift in preferences to online news decreases the demand for print newspapers (shifts left). The increased cost of paper pulp decreases the supply (shifts left). Both shifts cause the equilibrium quantity to decrease. The decrease in demand lowers the price, while the decrease in supply raises the price, making the final effect on price indeterminate.

Question 7

1. The equilibrium price will decrease, and the effect on equilibrium quantity will be indeterminate. (correct answer)
2. The equilibrium price will increase, and the effect on equilibrium quantity will be indeterminate.
3. The equilibrium quantity will decrease, and the effect on equilibrium price will be indeterminate.
4. The equilibrium quantity will increase, and the effect on equilibrium price will be indeterminate.

Explanation: The negative research findings will decrease demand (shift left), while the lower production cost will increase supply (shift right). Both of these changes put downward pressure on the equilibrium price, so the price will definitely decrease. The decrease in demand reduces quantity, but the increase in supply increases quantity, so the net effect on equilibrium quantity is indeterminate.

Question 8

1. quantity of the good supplied is equal to the quantity of the good demanded. (correct answer)
2. number of sellers of the good is exactly equal to the number of buyers of the good.
3. price of the good is at its legally mandated minimum or maximum level.
4. producers of the good are able to earn the maximum possible economic profit.

Explanation: Market equilibrium occurs at the specific price where the quantity that sellers are willing and able to sell is identical to the quantity that buyers are willing and able to purchase. This point represents a balance in the market with no inherent pressure for the price to change.

Question 9

1. the current price is below the equilibrium price, leading to quantity demanded exceeding quantity supplied. (correct answer)
2. the supply of the good is substantially greater than the demand for the good, causing downward pressure on prices.
3. the government imposes a binding price floor, preventing the market price from falling to its equilibrium level.
4. consumer incomes decrease for a normal good, leading to a leftward shift in the demand curve and a lower price.

Explanation: A shortage, or excess demand, is a state of disequilibrium that occurs when the price is below the equilibrium level. At this lower price, consumers wish to buy more of the good than producers are willing to sell, creating upward pressure on the price.

Question 10

1. the quantity demanded of a good is greater than the quantity supplied at the current market price.
2. the current market price is above the equilibrium price, resulting in quantity supplied exceeding quantity demanded. (correct answer)
3. technological advancements lead to a rightward shift of the supply curve, creating a new, lower equilibrium price.
4. the market price is held below the equilibrium level by an effective government-imposed price ceiling.

Explanation: A surplus, or excess supply, is a state of disequilibrium where the current price is higher than the equilibrium price. At this elevated price, producers supply more of the good than consumers are willing to purchase, creating downward pressure on the price.

Question 11

1. The equilibrium price will increase and the equilibrium quantity will increase. (correct answer)
2. The equilibrium price will decrease and the equilibrium quantity will increase.
3. The equilibrium price will increase and the equilibrium quantity will decrease.
4. The supply curve will shift to the right to meet the new consumer preferences.

Explanation: A shift in consumer preferences in favor of a product causes the demand curve to shift to the right. This leads to a new equilibrium point at a higher price and a higher quantity exchanged.

Question 12

1. Equilibrium price will decrease, and equilibrium quantity will decrease. (correct answer)
2. Equilibrium price will increase, and equilibrium quantity will decrease.
3. Equilibrium price will decrease, and equilibrium quantity will increase.
4. The supply curve for tablets will shift to the left as producers anticipate lower sales.

Explanation: For a normal good, a decrease in consumer income leads to a decrease in demand, shifting the demand curve to the left. The result is a lower equilibrium price and a lower equilibrium quantity.

Question 13

1. an increase in equilibrium price and an increase in equilibrium quantity.
2. a decrease in equilibrium price and an increase in equilibrium quantity. (correct answer)
3. a decrease in equilibrium price and a decrease in equilibrium quantity.
4. an increase in equilibrium price and a decrease in equilibrium quantity.

Explanation: A reduction in production costs causes an increase in supply, which is represented by a rightward shift of the supply curve. This leads to a new equilibrium at a lower price and a higher quantity.

Question 14

1. A surplus of rental units, as the quantity supplied will exceed the quantity demanded at the ceiling price.
2. A shortage of rental units, as the quantity demanded will exceed the quantity supplied at the ceiling price. (correct answer)
3. An increase in the quantity of rental units supplied as landlords respond positively to the new policy.
4. The market will achieve a new equilibrium at a price equal to the ceiling, but with a lower quantity.

Explanation: A binding price ceiling is set below the equilibrium price. At this lower price, the quantity of housing demanded by renters will be greater than the quantity supplied by landlords, resulting in a persistent shortage.

Question 15

1. A surplus of labor, where the quantity of labor supplied exceeds the quantity of labor demanded. (correct answer)
2. A shortage of labor, as more firms will seek to hire workers due to the government intervention.
3. A decrease in the quantity of labor supplied as some workers leave the market due to new regulations.
4. An automatic increase in labor demand by firms to match the new, higher wage requirement.

Explanation: A binding minimum wage is a price floor set above the equilibrium wage. At this higher wage, more people are willing to supply labor than firms are willing to demand (hire). This gap between quantity supplied and quantity demanded creates a surplus of labor, which is also known as unemployment.

Question 16

1. The price will fall, causing the quantity demanded to increase and the quantity supplied to decrease. (correct answer)
2. The price will rise, causing the quantity demanded to decrease and the quantity supplied to increase.
3. The supply curve will shift to the left to eliminate the excess goods from the market.
4. The demand curve will shift to the right as consumers are attracted by the high availability of the product.

Explanation: When a surplus exists, sellers have an incentive to lower their prices to sell their excess inventory. As the price falls, there is a movement down along the supply curve (quantity supplied decreases) and a movement down along the demand curve (quantity demanded increases) until the surplus is eliminated at the new equilibrium.

Question 17

1. The price remains fixed while producers work to increase output to meet the excess demand.
2. Sellers will lower their asking prices to encourage more consumers to enter the market.
3. The demand for the product will decrease on its own until it matches the available supply.
4. The price will rise, which will decrease the quantity demanded and increase the quantity supplied. (correct answer)

Explanation: A shortage puts upward pressure on the price as buyers compete for limited goods. As the price rises, it causes a movement up along the demand curve (quantity demanded decreases) and a movement up along the supply curve (quantity supplied increases). This process continues until the shortage is eliminated and the market reaches equilibrium.

Question 18

1. The supply of T-shirts will decrease, leading to a higher equilibrium price and lower equilibrium quantity. (correct answer)
2. The demand for T-shirts will decrease, leading to a lower equilibrium price and lower equilibrium quantity.
3. The supply of T-shirts will increase as producers sell existing inventory, lowering the equilibrium price.
4. Both the supply of and demand for T-shirts will decrease, causing an indeterminate change in price.

Explanation: The reduced yield of cotton increases the price of a key input for T-shirt production. This increase in input cost leads to a decrease in the supply of T-shirts (a leftward shift of the supply curve), resulting in a higher equilibrium price and a lower equilibrium quantity.

Question 19

1. The minimum wage will be non-binding and will not directly create unemployment or a shortage of workers. (correct answer)
2. The minimum wage will create a surplus of available jobs as firms rush to hire workers at the lower legal wage.
3. The minimum wage will cause unemployment because the quantity of labor supplied will exceed the quantity demanded.
4. The demand for labor will increase, and the supply of labor will decrease, due to the new government rule.

Explanation: A minimum wage is a price floor, or a legal minimum price. For it to be effective or binding, it must be set above the equilibrium price (wage). Since the minimum wage of $12 is below the market equilibrium wage of$15, the market can legally pay the equilibrium wage. The floor is non-binding and will have no effect on employment or wages in this market.

Question 20

1. A shortage will be created because the price is too high for many consumers to afford.
2. A surplus will be created because producers will supply more milk than consumers demand.
3. The market will be unaffected and will continue to operate at the equilibrium price of $3.50. (correct answer)
4. The demand for milk will increase, shifting the equilibrium price up to the $4.00 ceiling.

Explanation: A price ceiling is a legal maximum price. For it to be effective or binding, it must be set below the equilibrium price. Since the ceiling of $4.00 is above the equilibrium price of$3.50, the market price can legally reach equilibrium. Therefore, the price ceiling is non-binding and has no effect on the market outcome.