Economics - Microeconomics Topics
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quiz Questions
Q81
Which of the following scenarios describes a 'decrease in supply' rather than a contraction of supply?
The entire supply curve shifts leftward due to an increase in production costs
Producers reduce quantity supplied because the market price has dropped
There is a downward movement along the static supply curve
The price elasticity of supply falls strictly to zero
Explanation
A decrease in supply is caused by non-price determinants (like a rise in resource prices), shifting the entire supply curve leftward, while a contraction is caused solely by a drop in the product's own price.
Q82
If a manufacturing process exhibits a highly complex technical architecture that takes months to set up, its price elasticity of supply will be:
Highly inelastic
Perfectly elastic
Highly elastic
Unitary elastic
Explanation
When production setup involves long time lags or complex operational engineering, firms cannot scale up capacity rapidly in response to price hikes, resulting in inelastic supply.
Q83
The law of supply does NOT always hold true for which specific category of market goods?
Rare historical artifacts and antiquities
Mass-produced electrical consumer appliances
Perishable agricultural wholesale items
Standardized industrial intermediate components
Explanation
Rare historical artifacts, paintings by deceased artists, or classical antiquities have a fixed supply that cannot be increased regardless of how high market prices climb.
Q84
When a firm can easily find and recruit abundant unskilled labor at a constant wage rate, its short-run supply curve tends to be:
Highly elastic
Highly inelastic
Perfectly vertical
Downward sloping
Explanation
Easy availability of variable inputs at fixed costs prevents rapid surges in marginal costs during initial production expansion, keeping the supply curve highly elastic.
Q85
If the market price of a commodity increases from ₹100 to ₹110, causing the total quantity supplied to expand from 5000 units to 5200 units, the price elasticity of supply is:
0.4
2.5
1.0
0.2
Explanation
Percentage change in price = (10/100) * 100 = 10%. Percentage change in quantity supplied = (200/5000) * 100 = 4%. Es = 4% / 10% = 0.4.
Q86
Which of the following terms describes the period of time in which a firm can change all its inputs, including factory size and heavy machinery?
Long run
Short run
Market period
Very short period
Explanation
In the long run, all factors of production are variable, allowing firms to expand capacity or change scale completely.
Q87
If a government sets a legal maximum limit on the amount of a good that can be produced or imported, this administrative restriction is known as a:
Quota
Price ceiling
Price floor
Subsidy
Explanation
A quota is a government-imposed trade restriction that limits the physical quantity or value of a good that can be imported or produced during a specific period.
Q88
When the price of a good increases, what happens to the quantity supplied according to the law of supply?
It increases
It decreases
It remains constant
It first decreases then increases
Explanation
The law of supply states that there is a direct relationship between price and quantity supplied, meaning quantity supplied increases as price rises.
Q89
If a manufacturing business can store its finished goods easily at a very low cost, the price elasticity of supply for its product will be:
Highly elastic
Highly inelastic
Perfectly inelastic
Zero
Explanation
When goods can be stored safely and cheaply, firms can quickly release inventory during price hikes or stock it when prices fall, making supply highly elastic.
Q90
If the price of a product increases from ₹40 to ₹50, and the quantity supplied increases from 400 units to 600 units, calculate the price elasticity of supply using the percentage method.
2.0
0.5
1.0
1.5
Explanation
Percentage change in price = (10/40) * 100 = 25%. Percentage change in quantity = (200/400) * 100 = 50%. Es = 50% / 25% = 2.0.