AP Macroeconomics Practice Quiz: Market Equilibrium, Disequilibrium, and Changes in Equilibrium

Correct Answer: A

Market equilibrium is achieved at the specific price where the quantity of a good that consumers are willing and able to buy is exactly equal to the quantity that producers are willing and able to sell. This is the point of balance in the market.

Correct Answer: C

A surplus exists when the quantity supplied exceeds the quantity demanded. This imbalance occurs when the market price is set above the equilibrium price, encouraging producers to supply more than consumers are willing to buy at that high price.

Correct Answer: B

A shortage exists when the quantity demanded exceeds the quantity supplied. This imbalance occurs when the market price is set below the equilibrium price, encouraging consumers to demand more than producers are willing to supply at that low price.

Correct Answer: B

In a surplus (Qs > Qd), producers have unsold goods. To sell this excess inventory, they are incentivized to lower their prices. As the price falls, the quantity demanded increases and the quantity supplied decreases, eliminating the surplus and moving the market back to equilibrium.

Correct Answer: C

In a shortage (Qd > Qs), there are more buyers than available goods. This competition among buyers allows sellers to raise prices. As the price rises, some buyers drop out (quantity demanded decreases) and producers are incentivized to offer more for sale (quantity supplied increases), thereby eliminating the shortage.

Correct Answer: B

An increase in consumer income is a determinant of demand for a normal good, causing the demand curve to shift to the right. This shift creates a temporary shortage at the original price, which pushes the price up. The result is a new equilibrium at a higher price and a higher quantity.

Correct Answer: A

A technological innovation that lowers production costs is a determinant of supply, causing the supply curve to shift to the right. This shift creates a temporary surplus at the original price, which pushes the price down. The result is a new equilibrium at a lower price and a higher quantity.

Correct Answer: D

A decrease in supply (a leftward shift of the supply curve) is the only single-curve shift that results in a higher equilibrium price and a lower equilibrium quantity. This could be caused by an increase in the price of a key input like crude oil.

Correct Answer: C

Changes in equilibrium are caused by shifts in the supply or demand curves, which are triggered by changes in their underlying determinants. The destruction of the coffee crop is a determinant of supply, which will shift the supply curve to the left and establish a new equilibrium. Changes in price cause movements along the curves but do not shift them.

Correct Answer: A

Whenever markets experience imbalances like surpluses or shortages, market forces drive prices to adjust. A surplus puts downward pressure on prices, while a shortage puts upward pressure on prices. This price adjustment mechanism is the core force that moves a market back toward equilibrium.

Correct Answer: B

The decrease in the price of microchips increases supply (shifts supply right). The positive study increases demand (shifts demand right). Both shifts cause equilibrium quantity to increase. However, the supply shift puts downward pressure on price, while the demand shift puts upward pressure on price. The net effect on the equilibrium price is ambiguous without knowing the magnitude of the shifts.

Correct Answer: B

A price ceiling is a maximum price. When set below the equilibrium price, it creates a disequilibrium. At the lower price of $40, consumers will demand more than 200 units, while producers will supply fewer than 200 units. This imbalance where quantity demanded exceeds quantity supplied is a shortage.

Correct Answer: C

The intersection of the supply and demand curves is the graphical representation of market equilibrium. At this point, the price (on the vertical axis) is the equilibrium price, and the quantity (on the horizontal axis) is the equilibrium quantity, where quantities demanded and supplied are equal.

Correct Answer: A

At price P2, which is above the equilibrium price, the quantity supplied is Q3 (read off the supply curve) and the quantity demanded is Q1 (read off the demand curve). Since Qs > Qd, the market is experiencing a surplus. The size of the surplus is the difference between the quantity supplied and the quantity demanded, which is Q3 - Q1.

Correct Answer: A

At price P1, which is below the equilibrium price, the quantity demanded is Q3 (read off the demand curve) and the quantity supplied is Q1 (read off the supply curve). Since Qd > Qs, the market is experiencing a shortage. The size of the shortage is the difference between the quantity demanded and the quantity supplied, which is Q3 - Q1.

Correct Answer: D

A decrease in demand is represented by a leftward shift of the demand curve. Moving along the existing supply curve to the new intersection point results in both a lower equilibrium price and a lower equilibrium quantity. None of the other single shifts produce this specific outcome.