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Economics Theory of Supply MCQ
1. The supply of a goods means
(a) Actual production of goods
(b) Stock available for consumption
(c) Stock available for sale
(d) Amount of goods offered for sale at a particular price at a specified point of time
From the perspective of microeconomics, supply does not mean actual production of goods. It refers to total stock offered for sale at a particular price at a certain time. So, option (d) is correct.
2. Supply of goods implies
(a) Stock available for consumption
(b) Stocks available with all the producers of the capital goods
(c) Stocks available with a single producer
(d) All of these.
Supply of commodity means stock available for consumption. So, option (a) is correct.
3. An increase in the supply of a goods is caused by-
(a) Improvements in its technology
(b) Fall in the prices of other goods
(c) Fall in the prices of factors of production
(d) All of the above.
An increase in the supply of a goods may be caused by improvements technology, fall in the prices of other goods & fall in the prices of factors of production. So, option (d) is correct.
4. As per Law of Supply, other things being equal, there is a ——-between Price and Quantity Supplied.
(a) Direct relationship
(b) Inverse relationship
(c) Proportional relationship
(d) None of these.
As per law of supply, price and quantity supplied has a direct relationship. So, option (a) is correct.
5. Typically, the supply curve————-
(a) Slopes upward
(b) Slopes downward
(c) Is horizontally straight
(d) Is perpendicular
Price of the product and supply of the product have a direct relationship. So, supply curve slopes upward.
6. What does the upward slope of the aggregate supply curve shows
(a) Increase in price reduces supply
(b) Decrease in price increases supply
(c) Increase in price increases supply
(d) All of these.
Upward slope of the aggregate supply curve depicts that increase in price results in increase in supply. So, option (c) is correct.
7. Which of the following shows the quantity of products producer or seller wishes to sell at a given price level.
(a) Demand curve
(b) Supply curve
(c) Marginal product curve
(d) Production possibility curve.
Supply curve shows the quantity of products seller wants to sell at a given price level. So, option (b) is correct.
8. Elasticity of supply means change in supply due to change in
(a) price of the commodity
(b) condition of supply
(c) taste of the consumer
(d) none of these.
Elasticity of supply = (change in quantity supplied /change in price). So, option (a) is correct.
9. Elasticity of Supply is given by the formula-
(a) Change in price/Change in Quantity x (q/p)
(b) Change in price/Change in Quantity x (p/q)
(c) Change in Quantity/Change in price x (q/p)
(d) Change in Quantity/Change in price x (p/q)
Elasticity of supply =(Change in Quantity/Change in price) x (p/q) where p = Price, Q = Quantity supplied, Change in price = Change in price, Change in Quantity = change in quantity supplied. So, option (d) is correct.
10. If the price of orange rises from Rs.30 per kg to Rs.40 per kg and the supply increases from 240 kg to 300 kg. Elasticity of supply is
(a) 0.75
(b) 0.67
(c) .50
(d) .676
Change in supply= 300-240=60. Change in Price = 40-30-10.
Percentage change in supply = (60 / 240) x 100 = 25%, [or (60 / 240)=.25]
Percentage change in price = 10 / 30 x 100 = 33.33%, or [10 / 30=.333]
Elasticity of supply = 25% / 33.33% = .75 ., or [.25/.3333=.75]
So, option (a) is correct.
11. When price remains constant and quantity demanded changes, then the elasticity of demand will be:
(a) Vertical to X axis
(b) Horizontal to X axis
(c) 0
(d) 1
With constant price, changes in quantity demanded make demand curve horizontal to X axis. So, option (b) is correct
12. A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is:
(a) Zero
(b) Infinite
(c) > 1
(d) > 0
Horizontal to X axis supply curve implies infinity elasticity of supply. So, option (b) is correct
13. A perfectly inelastic supply curve will be:
(a) Parallel to X axis
(b) Parallel to Y axis
(c) Upward moving
(d) Bell shaped
A perfectly inelastic supply curve is vertical in shape. It is parallel to Y axis. So, option (b) is correct
14. When change in the quantity supplied is proportionate to the change in the price, the manufacture said to have ————-.
(a) Perfectly elastic supply
(b) Relatively elastic supply
(c) Unitary elastic supply
(d) Relatively inelastic supply
In case of unitary elastic supply percentage change in quantity supplied is equal to percentage change in price. So, option (c) is correct
15. When supply is perfectly inelastic, elasticity of supply is equal to:
(a) + 1
(b) 0
(c) > 1
(d) µ
In case of perfectly inelastic supply the value of elasticity of supply is zero. So, option (c) is correct
16. When supply is perfectly elastic, elasticity of supply is equal to—————.
(a) +1
(b) Less than zero
(c) -1
(d) Infinity.
Perfectly elastic supply indicates value of Elasticity of Supply as Infinity. So, option (d) is correct.
17. When supply is perfectly inelastic. Elasticity of supply is equal to——————.
(a) +1
(b) 0
(c) – .25
(d) Infinity
Perfectly inelastic supply indicates value of Elasticity of Supply as zero. So, option (b) is correct.
18. If percentage change in quantity supplied is equal to percentage change in price, elasticity of supply is
(a) -1
(b) 2
(c) Infinity
(d) none of these.
If percentage change in quantity supplied is equal to percentage change price, elasticity of supply is 1. So, option (d) is correct.
19. Elasticity between two points indicates
(a) Point elasticity
(b) Arc elasticity
(c) Price elasticity
(d) Any of the above
Elasticity between two points indicates Arc elasticity.So, option (b) is correct.
20. A change in the supply of a commodity along with same supply curve may occur due to:
(a) Change in the price of the commodity
(b) Change in the prices of related goods
(c) Change in technology
(d) Change in the cost of inputs
A change in the supply of a commodity along with same supply curve is called expansion or contraction of supply. It occurs due to change in the price of the commodity. So, option (a) is correct.
21. Expansion in supply refers to a situation when the producers are willing to supply :
(a) Larger quantity of the commodity at an increased price
(b) Larger quantity of the commodity due to increased taxation on the commodity
(c) Larger quantity of the commodity at the same price
(d) None of these
Expansion of supply occurs due to increase in supply price. Due to increase supply price producers are interested to supply larger quantity of the commodity at an increased price. So, option (d) is correct.
22. Increase or Decrease in Supply refers to
(a) Shift in Supply curve
(b) Movement along same supply curve
(c) Expansion or contraction of supply
(d) Any of the above
Increase or decrease in supply implies shifting in supply curve. Expansion or contraction of supply implies movement along same supply curve. So, option (a) is correct.
23. If there is an improvement in the technology, ————–.
(a) The supply curve shifts to the left
(b) The supply curve shifts to the right
(c) Supply curve remain unchanged
(d) Any of the above
Due to upgradation of technology, the supply curve will shift to right. So, option (b) is correct.
24. When lower quantities are supplied, due to changes in factors other than price, it is called.
(a) Contraction of Supply
(b) Expansion of Supply
(c) Decrease in Supply
(d) Change in Supply.
If lower quantities are supplied due to change in factors other than price, it is called decrease in supply. So, option (c) is correct.
25. In the short run, when supply remains constant an there is a fall in the price of the product, the producers’ profit level will———–.
(a) Increase
(b) Decrease
(c) Remains unchanged
(d) None of these.
In the short run, when supply remains constant an there is a fall in the price of the product, the producers’ profit level will decrease. So, option (b) is correct.
26. A Horizontal Supply Curve parallel to the quantity axis implies that the value of Elasticity of Supply is-
(a) Negative
(b) Infinity
(c) Equal to one
(d) Less than one.
A Horizontal Supply Curve parallel to the quantity axis implies that Elasticity of Supply is Infinity. So, option (b) is correct.
27. If supply curve is perfectly Inelastic, the supply curve is:
(a) Vertical
(b) Horizontal
(c) Upward sloping
(d) Downward sloping
If supply is perfectly inelastic, supply curve is vertical in shape. So, option (a) is correct.
28. When supply price rises in the short run, the profit of the producer ———-:
(a) Rises
(b) Reduces
(c) Remains constant
(d) Marginally reduces
As there is no change in cost per unit, increase of supply price in the short run will increase profit of producer. So, option (a) is correct.
