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Test: Theory Of Demand And Supply- 2

40 Questions MCQ Test Economics for CA CPT | Test: Theory Of Demand And Supply- 2

Description

Attempt Test: Theory Of Demand And Supply- 2 | 40 questions in 40 minutes | Mock test for CA Foundation preparation | Free important questions MCQ to study Economics for CA CPT for CA Foundation Exam | Download free PDF with solutions

QUESTION: 1

In the case of a Giffen good, the demand curve will be :

A.
horizontal.
B.
downward-sloping to the right.
C.
vertical.
D.
upward-sloping to the right.

Solution:

QUESTION: 2

By consumer surplus economists mean

A.
the area inside the budget line.
B.
the area between the average revenue and marginal revenue curves.
C.
the different between the maximum amount a person is willing to pay for a good and its market price.
D.
none of the above.

Solution:

QUESTION: 3

Which of the following is a property of an indifference curve?

A.
it is convex to the origin.
B.
the marginal rate of substitution is constant as you move along an indifference curve.
C.
marginal utility is constant as you move along an indifference curve.
D.
total utility is greatest where the 45 degree line cuts the indifference curve.

Solution:

QUESTION: 4

When economists speak of the utility of a certain good, they are referring to

A.
the demand for the good.
B.
the usefulness of the good in consumption.
C.
the satisfaction gained from consuming the good.
D.
the rate at which consumers are willing to exchange one good for another.

Solution:

QUESTION: 5

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.

Solution:

QUESTION: 6

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.

Solution:

QUESTION: 7

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.

Solution:

QUESTION: 8

Elasticity of supply refers to the degree of responsiveness of supply of a good to changes in its :

A.
demand.
B.
price.
C.
cost of production.
D.
state of technology.

Solution:

QUESTION: 9

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.

Solution:

QUESTION: 10

Contraction of supply is the result of :

A.
decrease in the number of producers.
B.
decrease in the price of the good concern.
C.
increase in the prices of other goods.
D.
decrease in the outlay of sellers.

Solution:

QUESTION: 11

Conspicuous goods are also known as

A.
prestige goods
B.
snob goods
C.
veblen goods
D.
all of the above

Solution:

QUESTION: 12

The quantity purchased will remain constant irrespective of the change in income. This is known as

A.
negative income elasticity of demand
B.
income elasticity of demand less than one
C.
zero income elasticity of demand
D.
income elasticity of demand is greater than one

Solution:

QUESTION: 13

As income increases, the consumer will go in for superior goods and consequently the demand for inferior goods will fall. This means:

A.
income elasticity of demand less than one
B.
negative income elasticity of demand
C.
zero income elasticity of demand
D.
unitary income elasticity of demand

Solution:

QUESTION: 14

When income increases the money spent on necessaries of life may not increase in the same proportion, This means

A.
income elasticity of demand is zero
B.
income elasticity of demand is one
C.
income elasticity of demand is greater than one
D.
income elasticity of demand is less than one

Solution:

QUESTION: 15

The luxury goods like jewellery and fancy articles will have

A.
low income elasticity of demand
B.
high income elasticity of demand
C.
zero income elasticity of demand
D.
none of the above

Solution:

QUESTION: 16

The good which cannot be consumed more than once is known as

A.
durable good
B.
non-durable good
C.
producer good
D.
none of the above

Solution:

QUESTION: 17

A relative price is

A.
price expressed in terms of money
B.
what you get paid for babysitting your cousin
C.
the ratio of one money price to another
D.
equal to a money price

Solution:

QUESTION: 18

The quantity demanded of a good or service is the amount that

A.
consumer plan to buy during a given time period at a given price
B.
firms are willing to sell during a given time period at a given price
C.
a consumer would like to buy but might not be able to afford
D.
is actually bought during a given time period at a given price

Solution:

QUESTION: 19

Demand is the

A.
unlimited wants of consumers
B.
entire relationship between the quantity demanded and the price of a good
C.
willingness to pay for a good if income is larger enough
D.
ability to pay for a good

Solution:

QUESTION: 20

If, as people’s income increases, the quantity demanded of a good decreases, the good is called

A.
a substitute
B.
a normal good
C.
an inferior good
D.
a complement

Solution:

QUESTION: 21

The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are

A.
normal goods
B.
complements
C.
substitutes
D.
inferior goods

Solution:

QUESTION: 22

Chicken and fish are substitutes. If the price of chicken increases, the demand for fish will

A.
increase or decrease but the demand curve for chicken will not change
B.
increase and the demand curve for fish will shift rightwards.
C.
not change but there will be a movement along the demand curve for fish.
D.
decrease and the demand curve for fish will shift leftwards.

Solution:

QUESTION: 23

Potato chips and popcorn are substitutes. A rise in the price of potato chips will ———— —— the demand for popcorn and the quantity of popcorn will ———————

A.
increase; increase
B.
increase; decrease
C.
decrease; decrease
D.
decrease; increase

Solution:

QUESTION: 24

Apple juice and orange juice are substitutes in consumption and apple juice and apple sauce are substitutes in production. If the price of orange juice———————— or the price of apple sauce ————————————, then the price of apple juice will ——— —————————

A.
increases; increases; increase
B.
decreases; decreases; increase
C.
decreases; increases; decrease
D.
increases; decreases; increase

Solution:

QUESTION: 25

An increase in the demand for computers and an increase in the number of sellers of computers will

A.
increase the number of computers bought
B.
decrease the price but increase the number of computers bought
C.
increase the price of a computer
D.
increase the price and the number of computers bought

Solution:

Correct Answer :- d

Explanation : An increase in demand for computers and increase in number of sellers of computers will decrease the number of computers bought. This is because the supply and demand have increased and the quantity demanded will also increase to achieve equilibrium.

QUESTION: 26

When total demand for a commodity whose price has fallen increases, it is due to:

A.
income effect.
B.
substitution effect
C.
complementary effect
D.
price effect

Solution:

QUESTION: 27

With a fall in the price of a commodity:

A.
consumer ’s real income increases
B.
consumer ’s real income decreases
C.
there is no change in the real income of the consumer
D.
none of the above

Solution:

QUESTION: 28

With an increase in the price of diamond, its demand also increases. This is because it is a:

A.
substitute good
B.
complementary good
C.
conspicuous good
D.
none of the above

Solution:

QUESTION: 29

The goods that exhibit direct price-demand relationship are called:

A.
Giffen goods
B.
Complementary goods
C.
Substitute goods
D.
None of the above

Solution:

QUESTION: 30

In Economics when demand for a commodity increases with a fall in its price it is known as:

A.
contraction of demand
B.
expansion of demand
C.
no change in demand
D.
none of the above

Solution:

QUESTION: 31

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

Solution:

QUESTION: 32

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.

Solution:

QUESTION: 33

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

Solution:

QUESTION: 34

If the price of a video rental is below the equilibrium price, the quantity supplied is ——— ———————— than the quantity demanded. If the price of video rentals is above the equilibrium price, the quantity supplied is ——————— than the quantity demanded.

A.
less; greater
B.
greater; greater
C.
greater; less
D.
less; less

Solution:

QUESTION: 35

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

Solution:

QUESTION: 36

If the supply of bottled water decreases, the equilibrium price ——————————— and the equilibrium quantity ——————————————

A.
increases ; decreases
B.
decreases; increases
C.
decreases; decreases
D.
increases; increases

Solution:

QUESTION: 37

An increase in the demand for cameras and an increase in the number of sellers of cameras will

A.
increase the number of cameras bought
B.
decrease the price but increase the number of cameras bought
C.
increase the price of cameras
D.
increase the price and the number of cameras bought

Solution:

QUESTION: 38

If good growing conditions increases the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought