Economics - Microeconomics Topics
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quiz Questions
Q71
Which of the following occurs when a firm increases its output due to a rise in the market price of its product, assuming all other factors remain constant?
An extension of supply shown as an upward movement along the curve
An increase in supply shown as a rightward shift of the curve
A contraction of supply shown as a downward movement along the curve
A decrease in supply shown as a leftward shift of the curve
Explanation
An increase in output driven solely by a rise in the product's own price is called an extension of supply and is represented by an upward movement along the existing supply curve.
Q72
If the price elasticity of supply for a commodity is exactly zero, what does it imply about the supply curve?
It is perfectly vertical and parallel to the price axis
It is perfectly horizontal and parallel to the quantity axis
It is a straight line passing through the origin at 45 degrees
It is downward sloping from left to right
Explanation
A price elasticity of supply equal to zero means supply is perfectly inelastic. The quantity supplied remains completely unchanged regardless of changes in price, resulting in a vertical supply curve.
Q73
Which of the following events will cause a direct leftward shift in the market supply curve for leather shoes?
An increase in the wages paid to shoe factory workers
A decrease in the market price of raw leather materials
An improvement in shoe stitching automation technology
A drop in the consumer demand for leather footwear products
Explanation
An increase in the wages of factory workers increases the cost of production. This reduces the profit margins of firms, causing them to decrease supply at every price level, shifting the curve leftward.
Q74
If a straight-line supply curve intersects the vertical price axis (Y-axis) below the origin in the negative region, its elasticity at any positive price is:
Less than one
Greater than one
Exactly equal to one
Infinite
Explanation
A linear supply curve that intersects the negative Y-axis must intersect the positive horizontal quantity axis (X-axis). Geometrically, any point on such a curve has a price elasticity of supply less than one.
Q75
When the price of a product increases from ₹50 to ₹60, a firm expands its supply from 1000 units to 1200 units. Calculate the price elasticity of supply.
1.0
2.0
0.5
1.2
Explanation
Percentage change in price = (10/50) * 100 = 20%. Percentage change in quantity = (200/1000) * 100 = 20%. Elasticity of Supply (Es) = 20% / 20% = 1.0.
Q76
Which of the following terms describes the total market value of a product sold by a firm, mathematically calculated as Price multiplied by Quantity Supplied?
Total revenue
Marginal revenue
Producer surplus
Total economic profit
Explanation
Total Revenue (TR) is the total money receipts of a firm from the sale of its output, calculated as Price (P) × Quantity (Q).
Q77
If a firm can alter its level of production instantly without experiencing any cost changes or delays, the elasticity of supply for its product is considered to be:
Perfectly elastic
Perfectly inelastic
Unitary elastic
Relatively inelastic
Explanation
Perfect flexibility in production with static unit costs implies that the firm can supply any amount of output at a fixed price, representing perfectly elastic supply.
Q78
Which of the following changes will cause a rightward shift in the market supply curve for commercially manufactured cars?
An introduction of a government subsidy for car manufacturers
An increase in the corporate tax rate applied to heavy industries
A general rise in the market wages of factory technicians
A sudden drop in the market retail price of vehicles
Explanation
A direct government subsidy provided to automotive assembly plants lowers production costs, making output more profitable and shifting the supply curve rightward.
Q79
If a straight-line supply curve intercepts the positive horizontal quantity axis (X-axis), the price elasticity of supply at any point in the positive quadrant will be:
Less than one
Greater than one
Exactly equal to one
Infinite
Explanation
Geometrically, any linear supply curve that cuts through the quantity axis to the right of the origin exhibits a price elasticity of supply that is strictly less than one (Es < 1).
Q80
When the price of a consumer good falls from ₹20 to ₹16, a supplier reduces its weekly output from 500 units to 350 units. What is the price elasticity of supply?
1.5
0.67
1.0
2.1
Explanation
Percentage change in price = (-4/20) * 100 = -20%. Percentage change in quantity = (-150/500) * 100 = -30%. Elasticity of Supply (Es) = -30% / -20% = 1.5.