WorksheetsCAF-ECO-2.3
Total questions: 100
Worksheet time: 3hrs 30mins
Supply refers to:
Quantity producers plan to sell at a given price and time
Quantity actually sold
Stock available in warehouse
Consumer willingness to buy
Supply is a:
Stock concept
Flow concept
Utility concept
Cost concept
Which of the following is NOT a determinant of supply?
Technology
Cost of production
Price of substitutes in production
Consumer income
A fall in the price of a commodity leads to:
Decrease in supply
Decrease in quantity supplied
Increase in supply
Increase in firms
A rise in input prices will cause
Supply to increase
Supply to decrease
Quantity supplied to increase
No change
If producers expect prices to fall in future, supply today will:
Fall
Rise
Remain constant
Become zero
When government gives subsidies, the supply curve:
Shifts left
Shifts right
Becomes vertical
Moves along the curve
When supply increases due to non-price factors, the supply curve:
Moves upward
Moves downward
Shifts rightward
Becomes flatter
In the very short period, supply is:
Perfectly elastic
Highly elastic
Perfectly inelastic
Unitary
The supply of agricultural goods in the short run is usually:
Highly elastic
Less elastic
Perfectly elastic
Infinite
Increase in the number of sellers causes:
Expansion in supply
Contraction of supply
Increase in supply
No change
A fall in wages of labour will lead to:
Supply curve left shift
Supply curve right shift
Upward movement
Vertical supply
Change in supply occurs due to:
Own price change
Movement along the curve
Non-price determinants
Change in equilibrium
A contraction in supply is caused by:
Fall in price
Rise in technology
Rise in subsidies
Entry of firms
High taxes cause:
Rightward shift of supply
Expansion of supply
Leftward shift of supply
Perfect elasticity
If firms expect future prices to rise, current supply:
Increases
Decreases
Becomes inelastic
Becomes zero
Elasticity of supply measures:
Sensitivity of demand to price
Responsiveness of supply to price
Responsiveness of supply to cost
Responsiveness of cost to supply
If Es > 1, supply is:
Inelastic
Unitary
Elastic
Zero
Perfectly elastic supply curve is:
Vertical
Horizontal
Downward sloping
Backward bending
Perfectly inelastic supply means:
Es = ∞
Es = 0
Es = 1
Es > 1
Unit-elastic supply means:
%ΔQ > %ΔP
%ΔQ = %ΔP
%ΔQ < %ΔP
NONE
Supply is more elastic when:
Time period is short
No factor substitution possible
Spare capacity available
Inputs are scarce
Es is lower when:
Raw materials are abundant
Production has flexibility
Factors are mobile
Production is complex
In the long run, supply tends to be:
Perfectly elastic
More elastic
Less elastic
Perfectly inelastic
Limited capacity makes supply:
More elastic at high output levels
Less elastic at high output levels
Perfectly elastic
Independent of capacity
Elasticity of supply depends primarily on:
Consumer tastes
Producer flexibility
Availability of substitutes for consumers
Market demand
If goods can be stored easily, supply tends to be:
Less elastic
Zero
More elastic
Perfectly inelastic
Price increases from ₹20 to ₹25. Quantity supplied rises from 100 to 130. Arc elasticity = ?
1
1.5
2
0.8
Price rises by 20%. Supply rises by 10%. Es = ?
0.5
2
1
0
Price rises from ₹40 to ₹44; Qs from 200 to 260. Es = ?
2
1.5
1
0.5
Es = 3. Price ↑ by 10%. What is % increase in supply?
30%
3%
10%
13%
Price ↑ from 50 to 60. Qs ↑ from 500 to 650. Es = ?
1
1.2
1.5
2
If Es = 0, change in price causes:
No change in quantity
Increase in quantity
Unstable supply
Zero price
Equilibrium price is where:
Qd > Qs
Qs > Qd
Qd = Qs
Price is maximum
When price is above equilibrium:
Excess demand
Excess supply
Shortage
No change
Excess demand causes price to:
Rise
Fall
Stay constant
Become zero
If demand decreases and supply remains constant, equilibrium price:
Rises
Falls
Stays same
Becomes infinite
If supply increases and demand decreases simultaneously:
Price rises
Price falls
Price remains constant
Quantity rises
A rightward shift in supply with constant demand will:
Raise price
Lower price
Increase demand
Reduce quantity
Producer surplus exists when:
Market price > minimum acceptable price
Market price = cost
Market price < minimum acceptable price
NONE
At equilibrium, producer surplus is:
Negative
Maximum
Zero
Minimum
If both demand and supply increase, equilibrium quantity:
Always falls
Always rises
May rise
Becomes zero
In equilibrium, market achieves:
Minimum efficiency
Social efficiency
Maximum inequality
Zero surplus
Price increases from ₹10 to ₹12 and quantity supplied increases from 30 to 42 units. Elasticity of supply (arc method) is:
1.67
2.00
1.25
3.20
A manufacturer supplies 200 units at ₹20. When price rises to ₹25, supply rises to 260. Es =
1.2
1.5
1.8
0.8
Price rises from ₹50 to ₹55; quantity supplied 100 to 110. Elasticity of supply =
1
0
2
5
A 25% rise in price causes 50% rise in supply. Es =
2
0.5
1
4
When price falls by 10%, supply falls by 5%. Elasticity =
0.5
2
1
0
Change in price causes no change in supply. This implies:
Es = 0
Es = ∞
Es = 1
Es > 1
At ₹30 supply is 100 units; at ₹36 supply is 140 units. Es =
1
2
0.5
1.5
Price rises by 12% and supply rises by 18%. Es is
Elastic
Inelastic
Unit elastic
Perfectly inelastic
Price increases from ₹5 to ₹7; supply 50 to 80. Es =
1.5
2.0
2.5
3.2
A firm has idle capacity & price rise → large supply rise: Es =
High
Low
Zero
Unit elastic
Firm supply in short run is:
Less elastic
Highly elastic
Perfectly elastic
Unitary
Price: ₹20→₹24, supply: 200→212. Es is
<1
=1
>1
∞
A vertical supply curve indicates:
Es = 0
Es = ∞
Es = 1
Es > 1
Cost rises (input price up). Supply curve:
Shifts left
Shifts right
Moves down the curve
Becomes horizontal
Price of wheat rises → farmers reduce corn supply. Reason:
Substitutes in production
Complements in production
No impact
Fixed resources
Price of raw materials increases leads to:
Decrease in supply
Increase in supply
Constant supply
Infinite supply
Given equilibrium table: Price (₹) — Qd / Qs; 6 — 10 / 30; 4 — 15 / 20; 3 — 20 / 20; 2 — 25 / 15. Equilibrium price =
₹6
₹4
₹3
₹2
In equilibrium, excess demand =
Price increase
Price decrease
Equal price
Equals to supply
If price > equilibrium price:
Excess supply occurs
Excess demand occurs
No imbalance
Infinite elasticity
Market supply = Firm A: 20 units Firm B: 50 units Firm C: 30 units Total supply =
100
90
120
70
At price below equilibrium:
Shortage
Surplus
No change
Stocks rise
Supply means quantity offered for sale at
A particular price
Any price
Free of cost
Only produced quantity
Supply is a
Flow concept
Stock concept
Both
None
Law of supply states relationship is
Direct
Inverse
Constant
Zero
Movement along supply curve is due to change in
Own price
Technology
Sellers
Factor prices
Shift of supply curve means change in
Supply
Quantity supplied
Both same
No change
Perfectly elastic supply means supply curve is
Horizontal
Vertical
Downward
Backward
Increase in number of firms → supply
Increases
Decreases
Constant
Zero
Excise duty rise → supply
Falls
Rises
Constant
Infinite
Supply curve generally slopes
Upward
Downward
Flat
Vertical
Supply depends mainly on
Cost
Taste
Population
All the above
Supply curve shifts right when
Cost decreases
Cost increases
Firms exit
Wages rise
Spare capacity available means supply is
Elastic
Inelastic
Zero
Perfectly elastic
Over longer time supply becomes
More elastic
Less elastic
Constant
Zero
If sellers expect price to rise in future, supply now
Falls
Rises
No change
Infinite
Technology improvement → supply
Increases
Decreases
Same
Zero
If change in Q < change in P, supply is
Inelastic
Elastic
Perfect
Unitary
If quantity supplied is very sensitive to price, supply curve is
Flatter
Steeper
Vertical
Bent
Increase in supply means
More supplied at same price
Supply falls
No change
Only movement
Elasticity of supply for perishable goods in very short period:
Zero
High
Unitary
Infinite
Excess supply puts pressure on price to
Fall
Rise
Constant
Zero
If supply = demand → market in
Equilibrium
Disequilibrium
Shortage
Surplus
Change in factor prices causes
Shift in supply
Movement only
No change
Vertical curve
If Es = ∞, supply curve
Horizontal
Vertical
Downward
Steep
Supply requires
Willingness + ability
Only willingness
Only ability
None
Profit motive leads to
Positive slope of supply curve
Negative slope
No slope
Vertical
Market supply is
Horizontal summation of individual supplies
Vertical summation
Total demand
Only one firm supply
Government subsidy → supply
Increases
Decreases
Zero
No change
Supply curve becomes less elastic at full capacity because
Cost rises faster
Idle resources
Raw material excess
Perfect labour mobility
What happens to equilibrium price when demand increases while supply remains constant?
It rises
It becomes zero
It falls
It remains the same
Which of the following factors does NOT affect supply?
Production costs
Number of sellers
Consumer preferences
Technology
When supply is perfectly elastic, the supply curve is:
Horizontal
Vertical
Upward sloping
Downward sloping
When the price of a good decreases, the quantity supplied typically:
Increases
Decreases
Remains unchanged
Becomes zero
If the government imposes a tax on a product, the supply curve will:
Remain unchanged
Shift left
Shift right
Become vertical
In the long run, supply is generally considered to be:
Less elastic
Unitary elastic
More elastic
Perfectly inelastic
What happens to supply when production costs decrease?
Supply becomes perfectly inelastic
Supply increases
Supply decreases
No change in supply
Elasticity of Perishable goods is?
Perfectly elastic
Perfectly inelastic
More elastic
Unitary elastic
