Question

43. If price rises, what happens to quantity supplied for a product? a. It increases. b. lit decreases. c. It does not change. d. Quantity supplied is constant, but supply increases 44. How will a decrease in price tend to affect supply? a. Supply will increase. 1. Supply will decrease. c. Supply will not change. d. Uncertain. 45. The amount of a good sold in a market at a particular price cannot exceed the quantity a. demanded at that price. b. supplied at that price. c. sold when there is a price floor. d. sold when there is a price ceiling 46. The government of Economica announces that it will purchase its farmers' surplus of milk. From this announcement, you can infer that Economica has a a. free market for milk. b. price ceiling above the equilibrium price for milk c. price floor above the equilibrium price for milk d. price floor below the equilibrium price for milk 47. If both the supply and demand curves shift to the left, then we can conclude that there will be a. an increase in the equilibrium quantity sold. b. a decrease in the equilibrium quantity sold. c. an increase in the equilibrium price. d. a decrease in the equilibrium price.

Answer 1

Q 43. The correct option is a. It increases. The law of supply states that as the price of a good rises, the producers will sell more of it as higher prices will give them higher profits.

A price rise cannot lead to a fall in quantity supplied because then the producer will incur a loss by not selling more. So option b is incorrect.

Option c is incorrect because with price rise, quantity supplied will definitely rise as per the law of supply.

Option d is incorrect because with price change quantity supplied will increase. Overall supply can increase with change in other factors too like decrease in the cost of production. But ceteris paribus, price rise leads to a rise in quantity supplied.

Q44. The correct option is b. supply will decrease.The law of supply states that as the price of a good rises, the producers will sell more of it as higher prices will give them higher profits and price fall leads to a fall in quantity supplied.

Option a is incorrect because the law of supply states that as the price of a good rises, the producers will sell more of it as higher prices will give them higher profits and price fall leads to a fall in quantity supplied.

Option c is incorrect because law of supply states that as the price of a good rises, the producers will sell more of it as higher prices will give them higher profits and price fall leads to a fall in quantity supplied.

Option d is incorrect because there is no uncertainty with the law of supply. It is a law and that will always work.

Q45. Option a is the correct option because goods will be sold in the market only if there is demand. no demand means goods will remain unsold.

Option b is incorrect because quantity sold in the market doesn't depend on the immediate supply. Goods can be sold from previous unsold stock of goods too.

Option c and d are incorrect because price flooring and ceiling limits the price of the good sold. In no way it restricts the quantity of goods demanded or sold in any way.

Q 46. Option c is correct because when the price floor is above the equilibrium price, there occurs excess supply and the government has to buy that excess stock of produced goods.

Option a is incorrect because in free market, there is no government intervention in the market. But here as government is buying milk from the market, the market doesn't remain free anymore.

Option b and d is incorrect because only a price flooring which is above the equilibrium price can lead to this situation. All the other cases in options b and d are invalid in these cases.