supply and demand MCQs – Page 2

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

supply and demand Mcqs

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

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