Economics - Microeconomics Topics
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quiz Questions
Q61
If a manufacturing firm faces a high risk of product obsolescence during storage, its elasticity of supply will generally be:
Inelastic
Highly elastic
Unitary elastic
Perfectly elastic
Explanation
High storage risks and quick obsolescence prevent firms from maintaining buffer inventories, making it harder to quickly respond to price variations and resulting in an inelastic supply.
Q62
What type of supply condition arises when multiple distinct products are extracted from a single natural resource simultaneously?
Joint supply
Composite supply
Competitive supply
Derived supply
Explanation
Joint supply occurs when the production of one good (e.g., refining crude oil into petrol and diesel) automatically creates a supply of secondary or related goods.
Q63
Which of the following occurrences is classified as an internal technical determinant for an increase in supply?
Adoption of an automated assembly line
A reduction in the price of competing market products
An upward adjustment in global fuel prices
An increase in direct taxation on operations
Explanation
Adopting an automated assembly line is a technical improvement that drops per-unit manufacturing costs, triggering a rightward shift (increase) in supply.
Q64
If a supply curve is represented by a linear ray originating precisely from the origin at a steep 75-degree slope, its price elasticity is:
Exactly equal to one
Strictly greater than one
Strictly less than one
Infinite
Explanation
Any linear supply curve originating directly from the origin point (0,0) exhibits an elasticity of supply exactly equal to 1, regardless of its inclination angle.
Q65
If a producer supplies 200 units of a good at a price of ₹40, and the price elasticity of supply is 2, how many units will be supplied if the price increases to ₹48?
280 units
240 units
320 units
220 units
Explanation
Percentage change in price = (8/40) × 100 = 20%. Since Es = 2, percentage change in quantity = 2 × 20% = 40%. New supply = 200 + (40% of 200) = 280 units.
Q66
Which of the following describes a long-run industry situation where expanding production forces resource prices upward?
Increasing-cost industry
Decreasing-cost industry
Constant-cost industry
Perfect-cost industry
Explanation
An increasing-cost industry experiences rising input costs as total industry output increases, which results in an upward-sloping long-run market supply curve.
Q67
If a firm's supply function is expressed mathematically as Qs = -50 + 5P, what is the lowest threshold price required for the firm to begin supplying a positive quantity?
₹10
₹5
₹50
₹0
Explanation
To find the threshold price, set Qs = 0. So, -50 + 5P = 0, which gives 5P = 50, or P = ₹10. Any price above ₹10 will yield a positive supply.
Q68
When an increase in the market price of Good M results in a leftward shift of the supply curve for Good N, the two goods are classified as:
Goods in competitive supply
Goods in joint supply
Complementary commercial goods
Perfect Giffen anomalies
Explanation
Goods are in competitive supply when they use the same production inputs. If the price of Good M rises, producers switch resources to make more M, decreasing the supply of Good N.
Q69
Which curve constitutes a perfectly competitive firm's short-run individual supply curve?
The segment of its marginal cost curve lying above the minimum average variable cost
The entire upward-sloping region of its average total cost curve
The downward-sloping segment of the average variable cost line
The horizontal segment of its average fixed cost layout
Explanation
In the short run, a perfectly competitive firm will produce at any price level above the minimum Average Variable Cost (AVC). Thus, its supply curve is its Marginal Cost (MC) curve above the minimum AVC.
Q70
If a firm faces highly rigid institutional production factors that cannot be altered for a long time, its supply is expected to be:
Highly inelastic
Perfectly elastic
Highly elastic
Unitary elastic
Explanation
Highly rigid factor constraints restrict a firm's ability to vary output levels quickly in response to market movements, resulting in inelastic supply conditions.