Free The Supply Curve 03 Practice Test - 11th Grade - Commerce
Question 1
When the prices of a good increases, ______
Quantity demanded increases
Quantity demanded decreases
Quantity supplied increases
Quantity supplied decreases
SOLUTION
Solution : B and C
When the prices of a good increases, the quantity demanded decreases and the quantity supplied decreases.
Question 2
The profit level that is just enough to cover the economic costs of the firm is called
SOLUTION
Solution :The profit level that is just enough to cover the economic costs of the firm is called normal profit.
Question 3
The costs (LRAC) and prices (P) for four firms are given in the options below. Which of these cannot lie on the long-run supply curve of a firm?
LRAC = Rs 20, P = Rs 20
LRAC = Rs 25, P = Rs 20
LRAC = Rs 20, P = Rs 25
LRAC = Rs 25, P = Rs 25
SOLUTION
Solution : B
A firm does not supply when the market price is less than the average cost. For option B, P < LRAC.
Question 4
There are three sellers A, B and C in a market. Their supply curves are given by the following equations.
qA=5p−30, p≥8qB=2p+20, p≥10qC=3p+10, p≥15
What is the total quantity supplied at a market price of Rs 10?
20
60
80
100
SOLUTION
Solution : B
Note that the supply curve of C starts only above a price level of 15. Hence, at a price of Rs 10, only the supply curves of B and C are relevant.
q=qA+qB⇒q=7p−10
At p=10, the quantity supplied is 60 units.
Question 5
The individual supply curves of two firms are
q1=p−2, p≥3q2=12(p−3), p≥4
The market supply curve is given by
q=0, p<3
q=p−2, 3≤p<5
q=32p−4, p≥5
All of these
SOLUTION
Solution : D
The individual supply curves of the two firms are
q1=p−2, p≥3q2=12(p−4), p≥5
p<3⇒q=03≤p<5⇒q=q1p≥5⇒q=q1+q2All options are correct.
Question 6
A 10% increase in the price of a good causes a 10% decrease in quantity supplied. The supply curve is a _______.
straight line passing through the origin
straight line not passing through the origin
straight line parallel to the x-axis
rectangular hyperbola
SOLUTION
Solution : A
ϵs=% change in quantity% change in price=1010=1
Unit elastic supply curves are straight lines passing through the origin.
Question 7
The supply curve is upward sloping because __________.
costs increase when the price increases
quantity demanded decreases when price increases
As the price increases, suppliers can justify producing at higher marginal costs
All of the above
SOLUTION
Solution : C
The supply curve is upward sloping because as price increases, suppliers can justify producing at higher marginal costs as long as MC < P.
Question 8
Study the supply curve given below and answer the following question.
At what price is the producer surplus equal to $2?
$1
$2
$3
$4
SOLUTION
Solution : C
Producer surplus, Π is the area above the supply curve and below the price line.
It can be seen that at a price of $3,
Π=12×(3−1)×2=$2
Question 9
Which of the following is not a determinant of a good's supply?
The cost of labour used to produce the good
The technology used for production
The number of sellers of the good
The income of the consumers who buy the good.
SOLUTION
Solution : D
Income of consumers who buy a good will only affects the demand for the good. All other factors will affect the supply.
Question 10
Study the supply curve given in the figure.
If the market price is $8, what is the quantity supplied?
10
20
30
40
SOLUTION
Solution : D
From the supply curve, it can be seen that corresponding to a price of $8, the quantity supplied is 40 units.