Economics study desk with supply and demand curves, scales and an economic city model

Focused topic practice

supply and demand MCQs

Practise focused supply and demand questions with marked answers for exam preparation and subject revision.

supply and demand Mcqs
1. An increase in income should ?
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A. shift demand for an inferior product inward

B. Shift supply for an inferior product inward

C. Shift demand for an inferior product outward

D. shift supply for an inferior product outward

2. Adding up the quantities demanded of a good by different people facing the same price gives us the ?
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A. Demand curve

B. Market demand curve

C. Supply curve

D. Market supply curve

3. A measurement showing how quantity demanded varies with income is the ?
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A. income elasticity of demand

B. budget elasticity of demand

C. Cross-price elasticity of demand

D. Price elasticity of demand

4. Economics assumes that people consume goods and services to achieve ?
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A. Status

B. Self-esteem

C. Utility

D. Prestige

5. Which of the following would increase aggregate demand ?
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A. Increased saving

B. Increasing import spending

C. Increased taxation revenue

D. increased investment

6. The price decrease from Rs 2,000 to Rs 1,800 Quantity demanded per year increases 5000 to 6000 units. Which of the following is correct ?
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A. Income elasticity is + 2

B. The good is inferior

C. The price elasticity of demand is -2

D. Income elasticity is + 0.5

7. if demand is price inelastic ?
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A. An increase in price must raise profits

B. A decrease in price reduces sales

C. An increase in price decrease revenue

D. An increase in price increase revenue
8. If the cross-price elasticity of demand between two goods is negative, then the two goods are ?
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A. Substitutes.

B. Complements

C. unrelated goods

D. normal goods

9. Improved training of employees would ?
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A. Shift aggregate demand to the right

B. Shift aggregate supply to the right

C. shift aggregate demand to the left

D. Shift aggregate supply to the left

10. The Setrite Corporation produce chairs. An economist working for the firm predicts that if peoples incomes rise next year, then the demand for our chairs will for our chairs will increase ceteris paribus The accuracy of the economists prediction depends on whether the chairs Setrite Produce ?
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A. are normal goods

B. have many complementary goods.

C. have few complementary goods.

D. have few substitutes.

11. If the cross elasticity of demand is -2 ?
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A. The products are complements and demand is cross price inelastic

B. The products are complements and demand is cross price elastic

C. The products are substitutes and demand is cross price elastic

D. The products are substitutes and demand is cross price inelastic

12. Firms are assumed to ________ costs and to ________ profits?
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A. charge earns

B. incur, desire

C. minimize, maximize

D. pay, make

13. If both marginal cost and marginal revenue increase, a firm ?
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A. Should increase output

B. Should reduce output

C. Should not change output

D. will require further information on how to respond
14. Inferior goods have _________ and luxury goods have _________?
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A. income elasticity greater than 1, negative income elasticities

B. negative income elasticity income elasticity greater than 1

C. Positive income elasticities, negative income elasticities

D. None of the above

15. Aggregate demand will increase if ?
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A. consumption falls

B. imports fall

C. investment falls

D. Exports fall

16. Which of the following would decease aggregate demand ?
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A. increasing export revenue

B. increased taxation revenue

C. increase consumption

D. increased investment

17. If a 4% increase in price leads to a increase in the quantity supplied of 8% ?
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A. Price elasticity of supply is -2

B. Supply is income elastic

C. Price elasticity of demand is -2

D. Supply is price elastic
18. Increased level consumption ?
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A. shift aggregate demand to the left

B. shift aggregate supply to the right

C. shift aggregate demand to the right

D. shift aggregate supply to the left
19. Increased levels of spending on imports ?
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A. shift aggregate supply to the right

B. shift aggregate demand to the right

C. shift aggregate supply to the left

D. shift aggregate demand to the left
20. The opportunity cost of a student is____________?
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A. Course fees and rent

B. What the student could have earned in the best job available by not studying

C. What the student will earn after graduation

D. A loan from the bank

21. A firm that makes profit in addition to normal profit is making ?
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A. Normal profit

B. Economic profit

C. supernormal profit

D. Accounting profit

22. When excess demand occurs in an unregulated market, there is a tendency for ?
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A. quantity supplied to decrease.

B. price to rise

C. quantity demanded to increase

D. price to fall

23. When the decrease in the price of one good causes the demand for another good to decrease, the goods are_________?
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A. substitutes

B. complements

C. nromal

D. inferior

24. When the market operates without interference, price increases will distribute what is available to those who are willing and able to pay the most. This process is known as ?
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A. price fixing

B. Quantity setting

C. quantity adjustment.

D. price rationing
25. An increase in productivity should ?
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A. Lead to a shift in supply outwards (i.e more supplied at each and every price)

B. Lead to a higher equilibrium and lower equilibrium quantity

C. Lead to a contraction of supply

D. Lead to an expansion of supply

26. If a firm wage costs increase this will cause __________ and __________?
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A. opportunity cost to increase the firm will close

B. average cost will rise output will increase ____ output and an upward shift in marginal revenue ____ output

C. marginal revenue to increase output to fall

D. marginal cost to increase, output to fall
27. A supply curve that starts at the origin has ?
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A. A positive price elasticity of supply

B. A price elasticity of supply less than one

C. A price elasticity of supply greater than one

D. A price elasticity of supply equal to one
28. The price of burgers increase by 22% and the quantity of burgers demanded falls by 25% This indicates that demand for burgers is ?
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A. unitarily elastic

B. inelastic.

C. elastic

D. perfectly elastic

29. A firm that breaks even after all economic costs are paid is earning ?
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A. Accounting profit

B. Economic profit

C. Normal profit

D. Supernormal profit

30. Increase unemployment benefits and less incentive to work would ?
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A. shift aggregate demand to the right

B. shift aggregate supply to the right

C. shift aggregate supply to the left

D. shift aggregate demand to the left

31. The extra utility from consuming one more unit of a good is called ?
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A. Additional utility

B. Marginal utility

C. Surplus utility

D. Bonus utility

32. A movement along the demand curve to the left may be caused by ?
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A. a rise in the price of inputs

B. a rise in income

C. a fall in the number of substitute goods

D. a decrease in supply.
33. The income effect of a price increase of a normal good is to ________ of that good and the substitution effect is to _________ of that good?
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A. reduce quantity demanded, increase quantity demanded

B. increase quantity demanded, reduce quantity demanded

C. reduce quantity demanded, reduce quantity demanded

D. increase quantity demanded, increases quantity demanded

34. The price of apples falls by 5% and quantity demanded increases by 6% This means that demand is ?
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A. elastic

B. perfectly elastic

C. zero elastic

D. inelastic

35. A shift in aggregate supply is likely to ?
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A. Reduce the general price level and increase national income

B. Reduce the general price level and reduce national income

C. Increase the general price level and reduce national income

D. Increase the general price level and increase national income

36. The quantity demanded of Pepsi has decreased. The best explanation for this is that ?
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A. Pepsis advertising is not as effective as in the past .

B. Pepsi consumers had an increase in income.

C. The price of Pepsi increased

D. The price of Coca Cola has increased,

37. If a product is an inferior good ?
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A. Demand in inversely related to price

B. Demand is inversely related to income

C. Demand is inversely related to the price of substitutes

D. Demand is directly related to price

38. An upward shift in marginal cost _____ output and an upward shift in marginal revenue ______ output?
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A. reduces; increases

B. reduces; reduces

C. increases; increases

D. increases; reduces

39. If the demand for coffee decreases as income decreases, coffee is ?
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A. a substitute good

B. a normal good

C. a complementary good

D. an inferior good

40. Normally a demand curve will have the shape:_________?
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A. Horizontal

B. Downward Sloping

C. Vertical

D. Upward Sloping

41. An increase in aggregate demand if aggregate supply is totally inelastic will ?
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A. decrease output and price

B. increase output but not price

C. increase price but not output

D. increase output and price

42. Which of the following is consistent with the law of supply ?
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A. As the price of calculators rise, the quantity supplied of calculators decreases, ceteris paribus.

B. As the price of calculators calls the supply of calculators increases, ceteris paribus.

C. As the price of calculators rise, the quantity supplied of calculators increases, ceteris paribus.

D. As the price of calculators rise, the supply of calculators increases ceteris paribus.

43. An increase in the costs of production will ?
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A. Shift demand outwards

B. Shift supply inwards

C. Shift demand inwards

D. Shift supply outwards so more is supplied at each and every price, all other things unchanged

44. The price elasticity of supply is +4 The price increases by 15% sales were originally 200 units What will they be now ?
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A. 320 units

B. 120 units

C. 80 units

D. 60 units

45. Marginal revenue is the ________ when output is __________?
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A. Change in total revenue, increase by one unit

B. change in total revenue increased

C. change in average revenue, increased by one unit

D. Change in average revenue, increased

46. If demand is __________ then price cuts will _________ spending?
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A. elastic, decrease

B. elastic; increase

C. none of the above

D. inelastic; increase

47. An increase in aggregate demand will have most effect on prices if ?
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A. Aggregate supply is price inelastic

B. Aggregate supply has a unitary price elasticity

C. Aggregate demand is price inelastic

D. Aggregate supply is price elastic
48. The price elasticity of demand measures ?
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A. a change in price

B. How far a demand curve shifts

C. a change in quantity demanded

D. The responsiveness of quantity demanded to a change in price
49. A fall in price ?
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A. Will cause an outward shift of supply

B. Leads to a higher level of production

C. Will cause an inward shift of demand

D. May be caused by a fall in demand
50. If your income doubles and the prices of the goods you buy double then your demand for these goods will likely?
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A. not change

B. shift

C. decrease

D. increase