# Free The Supply Curve 03 Practice Test - 11th Grade - Commerce

When the prices of a good increases, ______

A.

Quantity demanded increases

B.

Quantity demanded decreases

C.

Quantity supplied increases

D.

Quantity supplied decreases

#### SOLUTION

Solution : B and C

When the prices of a good increases, the quantity demanded decreases and the quantity supplied decreases.

The profit level that is just enough to cover the economic costs of the firm is called ___ profit.

#### SOLUTION

Solution :

The profit level that is just enough to cover the economic costs of the firm is called normal profit.

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?

A.

LRAC = Rs 20, P = Rs 20

B.

LRAC = Rs 25, P = Rs 20

C.

LRAC = Rs 20, P = Rs 25

D.

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.

There are three sellers A, B and C in a market. Their supply curves are given by the following equations.

qA=5p30, p8qB=2p+20, p10qC=3p+10, p15

What is the total quantity supplied at a market price of Rs 10?

A.

20

B.

60

C.

80

D.

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+qBq=7p10

At p=10, the quantity supplied is 60 units.

The individual supply curves of two firms are
q1=p2, p3q2=12(p3), p4

The market supply curve is given by

A.

q=0, p<3

B.

q=p2, 3p<5

C.

q=32p4, p5

D.

All of these

#### SOLUTION

Solution : D

The individual supply curves of the two firms are
q1=p2, p3q2=12(p4), p5

p<3q=03p<5q=q1p5q=q1+q2

All options are correct.

A 10% increase in the price of a good causes a 10% decrease in quantity supplied. The supply curve is a _______.

A.

straight line passing through the origin

B.

straight line not passing through the origin

C.

straight line parallel to the x-axis

D.

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.

The supply curve is upward sloping because __________.

A.

costs increase when the price increases

B.

quantity demanded decreases when price increases

C.

As the price increases, suppliers can justify producing at higher marginal costs

D.

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.

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

At what price is the producer surplus equal to $2? A.$1

B.

$2 C.$3

D.

A.

10

B.

20

C.

30

D.

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.