Economics - Microeconomics Topics
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quiz Questions
Q91
Which of the following causes a downward movement along a supply curve, signifying a contraction of supply?
A decrease in the price of the commodity itself
An increase in the price of inputs
An imposition of an industrial excise duty
A reduction in the number of market sellers
Explanation
A contraction of supply is represented by a downward movement along the same supply curve, which is caused solely by a decrease in the price of the commodity itself.
Q92
If a 20% surge in the market price of a good results in an increase in quantity supplied from 100 units to 110 units, the supply is considered to be:
Inelastic
Elastic
Unitary elastic
Perfectly elastic
Explanation
Percentage change in quantity = (10/100) * 100 = 10%. Percentage change in price = 20%. Es = 10% / 20% = 0.5. Since Es < 1, the supply is inelastic.
Q93
Which of the following will cause the market supply curve for organic wheat to shift directly to the left?
An increase in the price of organic fertilizers
An improvement in agricultural harvesting machinery
A grant of new financial production subsidies to farmers
A rise in the market selling price of organic wheat
Explanation
An increase in the cost of organic fertilizers raises input expenses, lowering profit margins and shifting the supply curve leftward (decrease in supply).
Q94
If a straight-line supply curve is drawn such that it intersects the vertical price axis (Y-axis) exactly at the origin, its elasticity at all points is:
Exactly equal to one
Strictly greater than one
Strictly less than one
Infinite at all levels
Explanation
Any linear supply curve originating directly from the origin coordinates (0,0) possesses a price elasticity of supply exactly equal to one, regardless of the angle it forms.
Q95
When the market price of a firm's product falls by 5%, its total volume of supply drops by exactly 5%. This indicates that the nature of supply is:
Unitary elastic
Perfectly elastic
Perfectly inelastic
Highly inelastic
Explanation
When the percentage change in quantity supplied is identical to the percentage change in price, the elasticity value is exactly 1, representing unitary elastic supply.
Q96
Which of the following describes the geometric shape of a supply curve that represents a perfectly elastic supply?
A horizontal straight line parallel to the quantity axis
A vertical straight line parallel to the price axis
An upward-sloping line cutting through the origin point
A downward-sloping rectangular hyperbola configuration
Explanation
A perfectly elastic supply (Es = infinity) means producers are ready to supply infinite units at a given price, resulting in a horizontal line parallel to the X-axis (quantity axis).
Q97
If a government eliminates an administrative export duty on a globally traded commodity, how does the domestic supply curve adjust?
It shifts directly to the right
It shifts directly to the left
It causes a downward contraction along the line
It remains perfectly frozen with no physical displacement
Explanation
Removing an export duty reduces the cost friction of selling goods, making production more profitable and shifting the supply curve rightward.
Q98
When a firm can easily substitute its primary manufacturing inputs with cheap alternative resources during a price crunch, its supply profile is:
Highly elastic
Highly inelastic
Perfectly vertical
Unitary inelastic
Explanation
High ease of factor substitution gives a firm massive operational flexibility to maintain or ramp up production when price signals shift, causing the supply to be highly elastic.
Q99
Which of the following specific situations maps out a clear exception to the standard law of supply?
An agricultural crop destroyed by sudden severe weather conditions
An industrial electronics item produced in an automated tech park
A standard consumer utility product sold in competitive retail outlets
A luxury vehicle assembled using highly customizable modular platforms
Explanation
Agricultural production relies heavily on unpredictable natural elements. If a crop is destroyed by weather or blight, its supply cannot increase even if market prices surge.
Q100
Calculate the price elasticity of supply if a 40% drop in a product's market valuation pulls down its manufacturing output from 1000 units to 600 units.
1.0
0.4
2.5
0.0
Explanation
Percentage change in price = -40%. Percentage change in quantity = (-400/1000) * 100 = -40%. Elasticity of Supply (Es) = -40% / -40% = 1.0 (Unitary Elastic).