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CA FOUNDATION ECONOMICS MCQ'S

500+ MCQs Series For CA FOUNDATION ECONOMICS CHAPTER 2 THEORY OF SUPPLY OBJECTIVE QUESTIONS MCQ'S TEST

CA FOUNDATION PAPER - 4 (BUSINESS ECONOMICS) 500+ MCQs

CHAPTER - 2 THEORY OF DEMAND AND SUPPLY MOST IMPORTANT OBJECTIVE QUESTIONS

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Theory of Demand
Theory of Supply 
Theory of Consumer Behaviour
Demand Forecasting

1. The supply of a good refers to:
    (a) Actual production of the good.
    (b) Total existing stock of the good.
    (c) Stock available for sale.
    (d) Amount of the good offered for sale at a particular price per unit of time.
Answer - (d)




2. Supply is a________ concept.
    (a) Flow
    (b) Stock
    (c) Flow and stock, both
    (d) Qualitative
Answer - (a)




3. Supply is the:
    (a) Limited resources that are available with the seller.
    (b) Cost of producing a good.
    (c) Entire relationship between the quantity supplied and the price of good
    (d) Willingness to produce a good if the technology to produce it becomes available.
Answer - (c)




4. The quantity supplied of a good or service is the amount that
    (a) Is actually bought during a given time period at a given price.
    (b) Producers wish they could sell at a higher price.
    (c) Producers plan to sell during a given time period at a given price.
    (d) People are willing to buy during a given time period at a given price.
Answer - (c)




5. In a very short period, the supply:
    (a) Can be changed.
    (b) Cannot be changed.
    (c) Can be increased.
    (d) None of the above.
Answer - (b)




6. Which of the following statement is correct?
    (a) Supply is inversely related to its cost of production
    (b) Price and quantity demand of a goods have direct relationship
    (c) Taxes and subsidy has no impact on the supply of the product
    (d) Seasonal changes have no impact on the supply of the commodity
Answer - (a)




7. The term supply refers to the amount of goods or services that the pro- ducers are__________ to the market at value prices during a given period of time.
    (a) Willing to offer
    (b) Able to Offer
    (c) Actually Sold
    (d) Both (a) & (b)
Answer - (d)




Determinants of Supply



8. Which of the following is a factor determining the supply?
    (a) Price of the good
    (b) Price of related goods
    (c) Price of factor of Production
    (d) All of the above.
Answer - (d)




9. Other things being equal, the________the relative price of a good The_______ the quantity of it that will be supplied.
    (a) Higher, Lesser
    (b) Higher, Greater
    (c) Lower, Lower
    (d) None of these
Answer - (b)




10. Under_______ conditions, Supply will be more than that under______conditions.
    (a) Competitive,Monopolized
    (b) Monopolized,Competitive
    (c) Monopolized, Oligopoly
    (d) Duopoly, Monopolized
Answer - (a)




11. The supply of a particular product depends upon the state of technology also. Inventions and innovations tend to make it possible to produce _________ goods with the same resources.
    (a) More
    (b) Better
    (c) Lesser
    (d) More and/or Better
Answer - (d)




Law of Supply



12. According to law of supply, change In supply is related to?
    (a) Price of goods
    (b) Price of related goods
    (c) Factors of Production
    (d) None of the above
Answer - (a)




13. If the demand is more than ply, then the pressure on price will be: sup.
    (a) Upward
    (b) Downward
    (c) Constant
    (d) None of the above
Answer - (a)




14. If the supply of bottled water decreases, other things remaining the same, the equilibrium price_______ and the equilibrium quantity________.
    (a) Increases; decreases.
    (b) Decreases; increases.
    (c) Decreases; decreases.
    (d) Increases; increases.
Answer - (a)




15. In the book market, the supply of books will decrease if any of the following occurs except
    (a) A decrease in the number of book publishers.
    (b) A decrease in the price of the book.
    (c) An increase in the future expected price of the book.
    (d) An increase in the price of paper used.
Answer - (b)




16. An increase in the number of sellers of bikes will increase the
    (a) The price of a bike.
    (b) Demand for bikes.
    (c) The supply of bikes.
    (d) Demand for helmets.
Answer - (c)




17. If good growing conditions increases the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought.
    (a) Increases and the price might rise,fall or not change.
    (b) Does not change but the price rises.
    (c) Does not change but the price falls.
    (d) Increases and the price rises.
Answer - (a)




18. The supply curve for perishable commodities is_______
    (a) Elastic
    (b) Inelastic
    (c) perfectly elastic
    (d) perfectly inelastic
Answer - (d)




19. When supply price increase in the short run, the profit of the producer________
    (a) Increases
    (b) Decreases
    (c) Remains constant
    (d) Decreases marginally
Answer - (a)




Increase or Decrease in the Quantity Supplied



20. Contraction of supply is the result of:
    (a) Decrease in the number of producers.
    (b) Decrease in the price of the good concerned.
    (c) Increase in the prices of other goods.
    (d) Decrease in the outlay of sellers.
Answer - (b)




21. When the supply of a good increase as a result of an increase in its price, then it is an increase in________and there is a upward ________ the supply curve.
    (a) Quantity Supplied, movement on
    (b) Quantity Supplied, Shift of
    (c) Supply, movement on
    (d) Supply, Shift of
Answer - (a)




22. Movements on the supply curve may be due to:
    (a) Change in price of goods goods
    (b) Change in price of related
    (c) Change in technology
    (d) None of the above.
Answer - (a)




23. Contraction of supply implies______
    (a) Decrease in cost of production
    (b) Decrease in price of the good concerned
    (c) Decrease in price of related good
    (d) Increase in price of the good concerned
Answer - (b)




Shifts in Supply Curve



24. An Increase in the supply of a good 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.
Answer - (d)




25. When supply curve moves to right, it means
    (a) Supply increases.
    (b) Supply decreases.
    (c) Supply remains constant
    (d) None of the above.
Answer - (a)




26. When supply curve shifts to the right there is:
    (a) An increase
    (b) Expansion
    (c) Contraction
    (d) Decrease
Answer - (a)




27. When supply curve moves to the left, it means
    (a) Smaller supply at a given price.
    (b) Larger supply at a given price.
    (c) Constant supply at a lower price.
    (d) None of the above.
Answer - (a)




28. When the supply curve shifts to the left or right, it is called as_________ or_______ in supply, respectively.
    (a) Decrease, Decrease
    (b) Decreases, Increase
    (c) Increase, Increase
    (d) Increase, Decrease
Answer - (b)




Elasticity of Supply



29. Elasticity of supply refers to the degree of responsiveness of supply a good to changes in Its:
    (a) Demand .
    (b) Price.
    (c) Cost of production
    (d) State of technology.
Answer - (b)




30. The elasticity of supply is defined as the
    (a) Responsiveness of the quantity supplied of a good to a change in its price.

    (b) Responsiveness of the quantity supplied of a good without change in its price

    (c) Responsiveness of the quantity demanded of a good to a change in its price.

    (d) Responsiveness of the quantity demanded of a good without change in its price
Answer - (a)




31. Elasticity of supply is measured by dividing the percentage change in quantity supplied of a good by_______
    (a) Percentage change in income
    (b) Percentage change in quantity demanded of goods.
    (c) Percentage change in price. (d) Percentage change in taste and preference
Answer - (c)




32. Which of the following statements is correct?
    (a) When the price falls the quantity demanded falls.
    (b) Seasonal changes do not affect the supply of a commodity
    (c) Taxes and subsidies do not influence the supply of the commodity.
    (d) With lower cost, it is profitable to supply more of the commodity
Answer - (d)




33. When price of a commodity Rises from 200 to 300 and Quantity supply increases from 2,000 to 5,000 units find elasticity of supply?
    (a) 3.0
    (b) 2.5
    (c) 0.3
    (d) 3.5
Answer - (a)




34. If price of computers increases by 10% and supply increases by 25%. The elasticity of supply is:
    (a) 2.5
    (b) 0.4
    (c) (-) 2.5
    (d) (-) 0.4
Answer - (a)




35. The Price of Commodity X in- creased from 2,000 per unit to 2,100 per unit and consequently the quantity supplied rises from 2,500 units to 3,000 units. The Elasticity of supply will be
    (a) 2
    (b) 4
    (c) .25
    (d) 0
Answer - (b)




36. Perishable commodities will have
    (a) Perfectly elastic curve
    (b) Perfectly inelastic curve
    (c) Elastic
    (d) Inelastic
Answer - (b)




37. A vertical supply curve parallel to Y axis implies that the elasticity of supply is:
    (a) Zero.
    (b) Infinity
    (c) Equal to one.
    (d) Greater than zero but less than infinity.
Answer - (a)




38. A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is:
    (a) Zero
    (b) Infinite.
    (c) Equal to one.
    (d) Greater than zero but less than one.
Answer - (b)




39. If the percentage change in supply is less than the percentage change in price it is called
    (a) Unit elasticity of supply.
    (b) Perfectly elastic.
    (c) More elastic supply
    (d) Inelastic supply
Answer - (d)




40. Elasticity of supply is zero means?
    (a) Perfectly inelastic
    (b) Perfectly elastic
    (c) Imperfectly elastic
    (d) All of the above
Answer - (a)




41. If the quantity supplied is exactly equal to the relative change in price then the elasticity of supply is:
    (a) Less than one.
    (b) Greater than one.
    (c) One.
    (d) None of the above
Answer - (c)




42. Elasticity of supply is greater than one when
    (a) Proportionate change in quantity supplied is more than the proportionate change in price.
    (b) Proportionate change in price is greater than the proportionate change in quantity supplied.
    (c) Change in price and quantity supplied are equal
    (d) None of the above.
Answer - (a)




43. When the supply of a product is perfectly inelastic then the curve will be
    (a) Parallel to Y-axis
    (b) Parallel to X-axis
    (c) At the angle of 45°
    (d) Sloping upwards
Answer - (a)




44. The cross elasticity between Rye bread and Whole Wheat bread is expected to be:
    (a) Positive
    (b) Negative
    (c) Zero
    (d) Can't say
Answer - (a)




45. The supply function is given Q =-100+10P Find the elasticity using point method, when price is 15
    (a) 4
    (b) -3
    (c) -5
    (d) 3
Answer - (d)




Equilibrium Price



46. Equilibrium refers to a market situation where quantity demand is to quantity supplied.
    (a) Equal
    (b) Less than or Equal
    (c) More than
    (d) More than or equal
Answer - (a)




47. The equilibrium price is deter mined by the inter-section between ________and________ called as the. It is also ________ equilibrium.
    (a) Demand, Supply, Static
    (b) Demand Supply,Dynamic
    (c) Supply, Demand, Partial
    (d) Demand, Supply, Market
Answer - (d)





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