Question

choose the correct answer

21\ Identify which one of the following changes in supply curve occurs when there is an increase in price of product:

A\  Increase in supply

B\ Extension in supply

C\ Decrease in supply

D\ Contraction in supply

            23\If the price of a product increases by 10% and demand decreases by 25%. It is the situation of:   

A\ Relatively inelastic demand

B\ Unitary elastic demand

C\ Perfectly elastic demand

D\ Relatively elastic demand

24\ In the analysis of its elasticity, if the demand for product “A” increases when the price of product “B” decreases, then those products are:

A/ Substitute products

B\ Inferior products

C\ Complementary products

D\ Independent products

25\ Identify the average fixed cost (AFC) if the output is 20 units and total fixed cost is RO 200:

A\ 80

B\ 60

C\ 20

D\10

26 State monopoly is the feature of:  

A\ Mixed economy

B\ Developed economy

C\ Socialist economy

D\ Capitalist economy

27\ Rise in the price of complementary goods leads to:  

A\ Increase in demand

B\ Extension of demand

C\ Contraction of demand

D\ Decrease in demand

28\Which one of the following is average variable cost (AVC) if the output is 50 units and total variable cost is RO1000?  

A\ 950

B\ 100

C\ 20

D\ 50

29\ Choose the RIGHT situation where demand will be inelastic:  

A\  Demand for necessary products

B\ Demand for the product having variety of uses

C\ None of the given options are correct

D\ Demand for luxury products

30\ Which one of the following are functions of central planning authority?

A\ Profit motive but not social benefit

B\ Control all resources of economy

C\ Decides preference of products to produce

D\ None of the given options are correct

Answer 1

21. B] Extenson of suppy happens in the supply curve due to the change in price. This because when there is an increase in supply due to increase in the price, then it results in the extension of the supply curve. When there is increase in the supply due to any other factor other than price, it is called increase in supply.

23. D] The elasticity in this case, the elasticity of demand is 2.5 which is greater than 1 which means the elasticity is relatively elastic.

24] C]The goods are complementary in nature as when the price of B decreses there is an increase in the demand of A which means the products are complementary products.

25] D]Average fixed cost is given by Total fixed cost divided by units of product. In the above case the TFC=200 and units equal to 20, which gives the AFC as 10.

26] C]State monoploy is a feature of socialist economy. Mixed economy is where we have both state and private run enterprises and capitalist economy is one where we have more of private sector enterprises.

27] D]Rise in the price of the complementary goods leads to decrese in the the demand of the goods. This is because and increase in price of A will lead to an increase in price of B as well and hence decrese in the demand.

28]C]Average variable cost is calculated by dividing the Total variable cost by units of quantity. Here, the TVC is equal to 1000 and units equal to 50, so the answer is AFC= 20.

29] A]The demand for the product will have inelastic demand is in the case of necessary productswhich can be life saving medicine etc.

30] C]The main job of the Central Planning Authority is to decide the preference for the products to be produced.