Economics - Microeconomics Topics
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quiz Questions
Q21
If a government provides a per-unit production subsidy to a manufacturer, how does it affect the market supply curve?
Shifts the supply curve rightward
Shifts the supply curve leftward
Causes an upward movement along the supply curve
Causes a downward movement along the supply curve
Explanation
A production subsidy lowers the effective cost of production for firms, increasing profitability and shifting the supply curve rightward.
Q22
Which of the following properties characterizes a typical short-run market supply curve?
It is upward-sloping from left to right
It is downward-sloping from left to right
It is perfectly horizontal
It is perfectly vertical
Explanation
Due to the law of diminishing marginal returns in the short run, marginal costs rise as output expands, making the short-run supply curve upward-sloping.
Q23
If a firm can easily shift its machinery from producing Good X to producing Good Y when the price of Y rises, the supply of Good X is said to be:
Highly elastic
Highly inelastic
Perfectly inelastic
Unitary elastic
Explanation
High mobility of production factors and alternative product ease allows firms to quickly adjust quantities, resulting in highly elastic supply.
Q24
A decrease in the number of firms operating within a highly competitive industry will cause:
A leftward shift of the market supply curve
A rightward shift of the market supply curve
A downward movement along the market supply curve
An upward movement along the market supply curve
Explanation
Fewer firms in the market mean less total output supplied at every price point, causing a leftward shift in the market supply curve.
Q25
If the market price of a good drops from ₹50 to ₹40, causing a firm to reduce its production from 500 units to 400 units, the price elasticity of supply is:
1.0
0.5
2.0
0.0
Explanation
Percentage change in price = -20%. Percentage change in quantity = -20%. Es = (-20%) / (-20%) = 1.0 (Unitary Elastic).
Q26
Which of the following scenarios best explains a 'contraction of supply'?
A decrease in quantity supplied due to a fall in its own price
A decrease in supply due to an increase in the cost of raw materials
A shift of the supply curve to the left because of new government regulations
An increase in production costs that forces smaller firms out of business
Explanation
A contraction of supply is an economic term that describes a decrease in the quantity supplied of a good, caused solely by a drop in its own market price.
Q27
If two goods, such as beef and leather hides, are produced together as part of a single production process, they are examples of:
Joint supply
Composite supply
Competitive supply
Derived supply
Explanation
Joint supply occurs when the production of one good automatically triggers the production of another as a byproduct or secondary output.
Q28
When a firm operates with a severe warehouse capacity bottleneck, any attempt to expand output will cause its short-run elasticity of supply to become:
Highly inelastic
Perfectly elastic
Unitary elastic
Infinite
Explanation
Physical overhead constraints or bottlenecks make it very difficult for a firm to increase output regardless of price hikes, rendering the supply highly inelastic.
Q29
According to the geometric method, what is the elasticity of supply at any point on a linear supply curve that cuts through the negative intercept of the price axis (Y-axis)?
Less than one
Greater than one
Equal to one
Zero
Explanation
A linear supply curve cutting through the negative Y-axis means it intersects the positive quantity axis (X-axis). Geometrically, any point on such a curve has an elasticity less than one (Es < 1).
Q30
Which of the following events will cause a rightward shift in the supply curve of a domestic smartphone manufacturer?
A reduction in import tariffs on essential electronic components
An increase in the minimum wage rate payable to manufacturing labor
A rise in the retail price of the smartphones in the local market
A levy of additional corporate tax on electronics industries
Explanation
A decrease in import tariffs on raw electronic components cuts down production costs, incentivizing the firm to increase supply at every price level.