# Free The Supply Curve 02 Practice Test - 11th Grade - Commerce

There are 20 identical firms in a market. At a price of Rs 20, firm 1 supplies 25 units of a good, What is the total supply at that price?

A.

25

B.

125

C.

250

D.

500

#### SOLUTION

Solution : D

Since the firms are identical, we can assume that their supply curves are identical. Hence, each firm would supply 25 units.
Qs=20×25=500

The supply curve of a firm is given by the equation q=250p250. If the price decreases by 2 units, ______

A.

quantity increases by 250

B.

quantity decreases by 250

C.

quantity increases by 500

D.

quantity decreases by 500

#### SOLUTION

Solution : D

Initially, let the price be p1
Quantity, q1=250p1250
At a price of p12
Quantity, q2=250(p12)250q2=(250p1250)500q2=q1500

Quantity reduces by 500 units

The oil company 'Standard Oil' delivers Q amount of oil to the market. They developed a new technology which helps them drill oil at a cheaper cost. As a result, 'Standard Oil' would be willing to ________.

A.

supply more oil at a given price

B.

supply less oil at a given price

C.

supply the same amount of oil at a lower price

D.

supply the same amount of oil at a higher price

#### SOLUTION

Solution : A and C

If the costs of production go down, the supply curve shifts to the right as the willingness to sell would be greater at any given price. Hence, 'Standard Oil' would supply more oil at a given price and the same amount of oil at a lower price.

At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?

A.

8

B.

12

C.

14

D.

18

#### SOLUTION

Solution : C

Given that
p0=Rs 10, p1=Rs 30, q0=4,ϵs=0.5, Δp=p1p0=Rs 20

ϵs=ΔqΔp×p0q0ϵs=Δq20×104=1.25Δq=1.25×4×2010Δq=10q1=q0+Δq=14

The price of a good changes from 10 to 20 and quantity supplied changes from 100 to 150. What is the elasticity of supply?

A.

0.25

B.

0.5

C.

1

D.

2

#### SOLUTION

Solution : C

%change in price = 201010×100=100%

%change in quantity = 150100100×100=50%

Elasticity=50100=0.5

Price elasticity is ______.

A.

negative for demand

B.

negative for supply

C.

positive for demand

D.

positive for supply

#### SOLUTION

Solution : A and D

Price elasticity is positive for supply and negative for demand.

For a price-taking firm, willingness to accept is equal to the ______.

A.

marginal cost

B.

price

C.

average total cost

D.

marginal revenue

#### SOLUTION

Solution : A

For a price-taking firm, willingness to accept is equal to the marginal cost. At any price less than the marginal cost, the firm will not produce an additional unit.

The supply curves of two firms 1 and 2 are given below.

q1=3p5, p5q2=6p1, p2

Choose the correct option(s) about the market supply. All prices are in rupees.

A.

Market supply is 48 at a price of Rs 6

B.

Market supply is 13 at a price of Rs 6

C.

Market supply is 23 at a price of Rs 4

D.

Market supply is 30 at a price of Rs 4

#### SOLUTION

Solution : A and C

Let q be the market supply.

p<2q=02p<5q=q1=6p1p5q=q1+q2=9p6

Hence, p=6q=9×66=48p=4q=6×41=23

Study the supply curve given below and answer the following question.

If the quantity supplied increases from 10 to 20, the total revenue ________.

A.

increases by $20 B. increases by$40

C.

increases by $60 D. increases by$80

#### SOLUTION

Solution : C

Case i:q=10, p=2, TR=$20Case ii:q=20; p=4, TR=$80

Total revenue increases by $60 Study the supply curve given below and answer the following question. If the market price is$4, the producer surplus is ________.

A.

$8 B.$12

C.

$16 D.$32

#### SOLUTION

Solution : C

Producer surplus, Π is the area above the supply curve and below the price.

Π=12×8×4=\$16