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Supply and Demand – MCQs
81 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
When marginal cost and marginal revenue both rise, what action should a firm take?
The firm ought to raise production levels
The firm should lower its output
Additional details are needed to determine the appropriate response
The firm should maintain its current output
2.
What type of profit does a company earn when it covers all its economic costs without making any extra gain?
Profit beyond economic costs
Profit calculated using accounting methods
Normal profit
Excess profit
None of the above
3.
What are the effects on marginal cost and output when a firm's wage expenses rise?
marginal cost rises, and production decreases
marginal revenue rises, and production decreases
opportunity cost rises, leading the firm to shut down
average cost increases, and output rises with a shift upward in marginal revenue
4.
At what point are profits at their highest level?
When expenses are reduced to the lowest possible amount
When total income reaches its peak
When the average cost is below the average revenue
When marginal cost is equal to marginal revenue
When fixed costs are completely eliminated
5.
What term describes the rise in total expense resulting from producing an additional unit?
cost per unit
foregone alternative cost
restricted cost
average cost
incremental cost
6.
What do we call the total quantity demanded of a product by all consumers at a given price?
Supply schedule
Aggregate demand curve
Individual demand curve
Market supply schedule
None of the above
7.
In economics, what is the primary reason individuals purchase goods and services?
To gain social standing
To earn admiration
To obtain satisfaction
To boost their confidence
To increase wealth
8.
When the price of a normal good rises, how do the income effect and substitution effect each influence the quantity demanded of that good?
Raise the quantity demanded, then lower the quantity demanded
Raise the quantity demanded, then raise the quantity demanded
Lower the quantity demanded, then lower the quantity demanded
Lower the quantity demanded, then raise the quantity demanded
No change in quantity demanded for either effect
9.
What type of income elasticity do inferior goods exhibit compared to luxury goods?
Negative income elasticity for inferior goods and income elasticity exceeding 1 for luxury goods
Income elasticity above 1 for inferior goods and negative income elasticity for luxury goods
Positive income elasticity for inferior goods and negative income elasticity for luxury goods
None of the given choices
10.
What do positive and negative cross-price elasticities indicate about the relationship between two goods?
inferior goods and substitutes
complements and normal goods
substitute goods and complementary goods
inferior goods and normal goods
11.
When demand is __________, how will reducing prices affect consumer expenditure?
not sensitive; raise spending
sensitive; boost spending
sensitive; lower spending
none of these
cannot be determined
12.
What is the effect of a rise in import expenditures on the aggregate demand curve?
Cause the aggregate supply curve to move rightward
Cause the aggregate supply curve to move leftward
Cause the aggregate demand curve to shift rightward
Cause the aggregate demand curve to shift leftward
No significant impact on aggregate demand or supply
13.
How would raising unemployment benefits and reducing the motivation to work affect the aggregate supply curve?
Cause the aggregate supply curve to move rightward
Cause the aggregate supply curve to move leftward
Cause the aggregate demand curve to shift rightward
Cause the aggregate demand curve to shift leftward
No significant effect on aggregate supply or demand
14.
Which factor would lead to a reduction in aggregate demand?
A rise in consumer spending
A growth in export income
An increase in tax collections
A boost in capital investment
An expansion in government expenditure
15.
When does a rise in aggregate demand primarily impact prices the most?
When aggregate supply is unresponsive to price changes
When aggregate supply responds significantly to price changes
When aggregate supply changes proportionally with price
When aggregate demand does not respond to price variations
When aggregate demand is highly sensitive to price
16.
What is the likely effect of a shift in the aggregate supply curve?
Lower the overall price level and decrease the total national income
Lower the overall price level and raise the total national income
Raise the overall price level and decrease the total national income
Raise the overall price level and increase the total national income
17.
If the price rises from 25 pence to 30 pence and the quantity supplied increases from 40 units to 44 units, what is the price elasticity of supply?
+2.0
+0.5
-2.0
-0.5
None of the above
18.
What is the effect on supply when the price rises, assuming all other factors remain constant?
Supply curve shifts to the right
Supply curve shifts to the left
Supply decreases
Supply increases
19.
When does a contraction in supply take place?
When demand increases and moves outward
When the supply curve moves inward
When the quantity supplied decreases as price drops
When the supply curve moves outward
20.
Under which condition is the supply curve expected to be more responsive to price changes?
During the short-term period instead of the long-term
When production resources cannot easily move between sectors
When the market consists of only a small number of suppliers
When increasing production is straightforward and feasible
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