1st Nov Theory of Supply Quiz 3 – Punjab Meritorious School Preparation Portal

Welcome to your 1st Nov Theory of Supply Quiz 3 CBT TEST

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An increase in price will result in an increase in total revenue if

The percentage change in quantity demanded is less than the percentage change in price

The percentage change in quantity demanded is greater than the percentage change in price.

Demand is elastic.

The consumer is operating along a linear demand curve at a point at which the price is very high and the quantity demanded is very low.

If electricity demand is inelastic, and electricity charges increase, which of the following is likely to occur?

Quantity demanded will fall by a relatively large amount.

Quantity demanded will fall by a relatively small amount.

Quantity demanded will rise in the short run, but fall in the long run.

Quantity demanded will fall in the short run, but rise in the long run.

Suppose the demand for meals at a medium-priced restaurant is elastic, if the management of the restaurant is considering raising prices, it can expect a relatively

Large fall in quantity demanded.

Large fall in demand.

Small fall in quantity demanded.

Small fall in demand.

If the local pizzeria raises the price of a medium pizza from 60 to 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is (Use Arc Elasticity Method)

1.5

2.0

3.0

When the numerical value of cross elasticity between two goods is very high, it means

The goods are perfect complements and therefore have to be used together

The goods are perfect substitutes and can be used with ease in place of one another

There is a high degree of substitutability between the two goods

The goods are neutral and therefore cannot be considered as substitutes

Point elasticity is useful for which of the following situations?

The bookstore is considering doubling the price of notebooks.

A restaurant is considering lowering the price of its most expensive dishes by 50 percent.

An auto producer is interested in determining the response of consumers to the price of cars being lowered by Rs 100.

None of the above.

Which of the following is an incorrect statement?

When goods are substitutes, a fall in the price of one (ceteris paribus) leads to a fall in the quantity demanded of its substitutes.

When commodities are complements, a fall in the price of one (other things being equal) will cause the demand of the other to rise

As the income of the consumer increases, the demand for the commodity increases and vice versa.

When a commodity becomes fashionable people prefer to buy it and therefore its demand always increases

Suppose the price of movies seen at a theatre rises from Rs 120 per person to Rs 200 per person. The theatre manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies? (Use Arc Elasticity Method)

1.0

1.2

Suppose a department store has a sale on its silverware. If the price of a plate-setting is reduced from Rs 300 to Rs 200 and the quantity demanded increases from 3,000 plate-settings to 5.000 plate-settings. what is the price elasticity of demand for silverware? (Use Arc Elasticity Method)

1.0

1.25

1.50

A decrease in price will result in an increase in total revenue if

The percentage change in quantity demanded in less than the percentage change in price.

The percentage change in quantity demanded is greater than the percentage change in price.

Demand is inelastic

The consumer is operating along a linear demand curve at a point at which the price is very low and the quantity demanded is very high.

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