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# CA Foundation | Supply MCQ Test | Chanakya Commerce Classes

CA Foundation Paper 4 Business Economics Chapter 2 Unit 3 Supply MCQ test page with instant scoring by Chanakya Commerce Classes.

Canonical URL: https://www.chanakyaclasses.com/mcqs/supply

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Business Economics MCQ
Chapter 2 · Unit ·3 Supply
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CA Foundation · Paper 4 · Business Economics
Chapter 2 · Unit ·3
Supply
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30 MCQs
Foundation Level
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Question 01
The law of supply states that:
price and quantity supplied are inversely related
price and quantity supplied are directly related
supply is constant at all prices
price does not affect supply
Law of supply: higher price generally leads to higher quantity supplied, other things remaining the same.
Question 02
An increase in supply is represented by:
rightward shift of supply curve
movement along supply curve
leftward shift
no change
Increase in supply means more is supplied at the same price, so the supply curve shifts right.
Question 03
A movement along the supply curve occurs due to change in:
technology
cost of production
price of the good itself
government policy
Movement along the supply curve happens only due to change in the commodity’s own price.
Question 04
Which of the following is NOT a determinant of supply?
technology
factor prices
tax policy
consumer income
Consumer income affects demand, not supply.
Question 05
If cost of production rises, supply will:
increase
decrease
remain unchanged
first increase then decrease
Higher production cost reduces profitability, so supply decreases.
Question 06
Perishable goods generally have:
perfectly inelastic supply
perfectly elastic supply
unitary elasticity
infinite elasticity
Perishable goods cannot be stored, so their supply is often fixed in the market period.
Question 07
Elasticity of supply measures:
change in demand
price fluctuation
responsiveness of supply to price change
consumer behaviour
Elasticity of supply tells us how much quantity supplied responds to a change in price.
Question 08
If quantity supplied increases from 50 to 75 when price rises from 10 to 15, elasticity of supply is:
0.5
1
2
3
Percentage change in supply = 50%; percentage change in price = 50%; so elasticity of supply = 1.
Question 09
Which factor makes supply more elastic?
short time period
perishable goods
fixed factors
long time period
Supply becomes more elastic in the long run because firms get time to adjust output and capacity.
Question 10
If sellers expect prices to rise in future, current supply will:
decrease
increase
remain constant
be zero
Producers may hold back current supply if they expect higher prices later.
Question 11
If price of a substitute good rises, supply of the given good will:
increase
remain same
decrease
become zero
Producers may shift resources toward the substitute that has become more profitable, reducing supply of the original good.
Question 12
A backward bending supply curve is associated with:
capital goods
labour supply
agriculture
manufacturing
Labour supply may bend backward when higher wages induce more leisure instead of more work.
Question 13
When supply increases due to improved technology, it is called:
increase in supply
extension of supply
contraction of supply
decrease in supply
Improved technology is a non-price factor, so it causes a rightward shift, यानी increase in supply.
Question 14
Extension of supply means:
increase due to technology
shift in supply curve
increase in number of firms
increase in quantity supplied due to rise in price
Extension of supply is movement along the same supply curve because of increase in own price.
Question 15
If government imposes heavy tax, supply will:
increase
remain unchanged
decrease
double
Tax increases cost of production and reduces profitability, so supply decreases.
Question 16
If elasticity of supply is zero, supply is:
perfectly inelastic
perfectly elastic
unitary
elastic
When quantity supplied does not change at all with price, elasticity of supply is zero.
Question 17
If elasticity of supply is infinite, supply curve is:
vertical
upward sloping
backward bending
horizontal
Perfectly elastic supply is shown by a horizontal supply curve.
Question 18
If price rises by 20% and supply rises by 10%, elasticity is:
0.2
0.8
0.5
2
Elasticity of supply = percentage change in quantity supplied / percentage change in price = 10 / 20 = 0.5.
Question 19
In very short period, supply is:
perfectly inelastic
elastic
perfectly elastic
unitary
In the very short run or market period, firms cannot adjust output, so supply is fixed.
Question 20
Which industry generally has more elastic supply?
agriculture
manufacturing
perishable goods
natural resources
Manufacturing firms can usually adjust production more easily than agriculture or perishable goods sellers.
Question 21
Assertion: Supply increases with price. Reason: Higher price increases profitability.
Both true and reason explains
Both true but not related
Assertion true, reason false
Both false
This is the standard explanation of the law of supply under normal conditions.
Question 22
Assertion: Supply curve always slopes upward. Reason: Law of supply has no exceptions.
Both true
Both false
Assertion true, reason false
Assertion false, reason true
The usual supply curve slopes upward, but there are exceptions such as backward bending labour supply.
Question 23
Which causes decrease in supply?
subsidy
increase in cost
better technology
entry of firms
Increase in production cost reduces supply; the others generally increase supply.
Question 24
Supply is perfectly elastic when:
price changes but quantity does not
quantity changes but price does not
both change equally
infinite quantity is supplied at one price
Perfectly elastic supply means sellers are willing to supply any amount at a given price.
Question 25
Supply curve shifts right when:
technology improves
price rises
demand rises
income rises
Improved technology lowers cost and increases supply, shifting the curve rightward.
Question 26
Contraction of supply means:
shift left
increase in supply
decrease in quantity supplied due to fall in price
technology change
Contraction of supply is movement downward along the same supply curve because price falls.
Question 27
Elasticity of supply is greater in:
very short run
long run
market period
none
Longer time period means more flexibility in adjusting supply, so elasticity is greater.
Question 28
Price increases by 10% and supply increases by 20%. Elasticity is:
2
0.5
1
0
Elasticity of supply = 20 / 10 = 2.
Question 29
Supply depends on:
income
tastes
population
cost of production
Cost of production is a key determinant of supply; the other listed factors are mainly demand-side.
Question 30
If price falls but supply still increases, the most likely reason is:
law of supply failure
improvement in technology
fall in demand
increase in income
A rightward shift in supply due to better technology can outweigh the negative effect of a lower price.
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Chanakya Commerce Classes
MCQ Test · Chapter 2 · Unit · Supply