CUET UG Booster Economics 4 Test (D5) -

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CUET UG Booster Economics 4 Test (D5)

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Booster Economics 4 Test (D5)

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QUESTION 1 OF 20

Assertion (A): An upward shift in the marginal cost curve indicates a decrease in total fixed cost.
Reason (R): Any factor that increases marginal cost at a given output level shifts the firm's supply curve to the left.

Answer Review

1 Assertion (A): An upward shift in the marginal cost curve indicates a decrease in total fixed cost.
Reason (R): Any factor that increases marginal cost at a given output level shifts the firm's supply curve to the left.

A Both A and R are false

B A is true, but R is false

C Both A and R are true, and R explains A

D A is false, but R is true

💡 Short Explanation

Marginal cost is unaffected by total fixed cost. Higher marginal cost reduces supply. Supply shifts left when production costs increase.

✅ Correct Answer Explanation

Evaluate each statement: Assertion (A): False. An upward shift in the marginal cost (MC) curve does not indicate a decrease in total fixed cost. Fixed cost does not affect marginal cost because MC depends only on changes in variable cost. Reason (R): True. Any factor such as higher input prices or taxes that increases marginal cost at each output level shifts the firm's supply curve to the left. Therefore, the Assertion is false while the Reason is true. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Both A and R are false.

The Reason is correct according to NCERT.

Option B → A is true, but R is false.

The Assertion is incorrect because fixed cost does not affect MC.

Option C → Both A and R are true, and R explains A.

The Assertion itself is false.

🎯 Strategy

Used

Elimination

Application:

Evaluate the Assertion and Reason independently using the concept of marginal cost.

Final Logic:

MC depends on variable cost, not fixed cost.

🧠 Memory Trick

Fixed Cost ≠ MC

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Marginal Cost and Supply Curve

2 Regarding the firm's supply curve, which of the following combinations is correct?
I. It is essentially a segment of the marginal cost curve.
II. Factors affecting the marginal cost curve do not affect the supply curve.
III. In the short run, it requires the price to be greater than or equal to minimum AVC.

A I and II only

B I and III only

C II and III only

D All of the above

💡 Short Explanation

Supply is derived from the MC curve. MC determinants also affect supply. Production occurs only if Price ≥ Minimum AVC.

✅ Correct Answer Explanation

Evaluate each statement: Statement I: Correct. The firm's supply curve is the rising portion of the MC curve. Statement II: Incorrect. Any factor shifting the MC curve also shifts the supply curve. Statement III: Correct. In the short run, production occurs only when price is at least equal to minimum AVC. Therefore, Statements I and III are correct. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → I and II only.

Statement II is incorrect.

Option C → II and III only.

Statement II is false.

Option D → All of the above.

Statement II makes this option incorrect.

🎯 Strategy

Used

Elimination

Application:

Verify each statement separately using NCERT concepts.

Final Logic:

MC Determines Supply; MC Changes Shift Supply.

🧠 Memory Trick

MC + AVC = Supply Rule

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Firm's Supply Curve

3 Trace the economic sequence of an organisational innovation:
1. The firm's supply curve shifts to the right.
2. The firm undergoes an organisational innovation.
3. The firm uses fewer inputs to produce the same output.
4. The marginal cost drops at every level of output.

A 4, 3, 2, 1

B 1, 2, 3, 4

C 2, 3, 4, 1

D 3, 4, 1, 2

💡 Short Explanation

Innovation occurs first. Efficiency improves. Marginal cost falls. Supply shifts right.

✅ Correct Answer Explanation

The logical sequence is: 1. The firm undergoes organisational innovation. 2. The firm uses fewer inputs for the same output. 3. Marginal cost decreases at every output level. 4. The supply curve shifts to the right. Thus, the correct order is: 2 → 3 → 4 → 1 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Begins with the effect instead of the cause.
Option B → Starts with the final outcome.
Option D → Omits the innovation step first.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Arrange the events in the proper economic cause-and-effect sequence.

Final Logic:

Innovation → Efficiency → Lower MC → Right Shift.

🧠 Memory Trick

Innovate → Save Inputs → Lower MC → Supply

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Technology and Supply

4 Match the scenario to its resulting market outcome:

List 1	List 2
1. Marginal Cost shifts downward	a. Rightward supply shift
2. More units supplied at the same price	b. Result of efficiency increase
3. No change in technology or inputs	c. Supply curve remains the same
4. Regression in production technology	d. Leftward supply shift

A 1-c, 2-d, 3-a, 4-b

B 1-b, 2-a, 3-d, 4-c

C 1-a, 2-b, 3-c, 4-d

D 1-d, 2-c, 3-b, 4-a

💡 Short Explanation

Lower MC increases supply. Efficiency raises output. No change means supply remains unchanged. Technological regression reduces supply.

✅ Correct Answer Explanation

The correct matching is: 1 → a: Lower MC causes a rightward shift in supply. 2 → b: More output at the same price is the result of greater efficiency. 3 → c: No change in technology or input prices means the supply curve remains unchanged. 4 → d: Technological regression raises costs and shifts supply left. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrectly matches MC reduction with no supply change.
Option B → Reverses the first two relationships.
Option D → Reverses the effect of technological regression.

🎯 Strategy

Used

Option Grouping

Application:

Match each production event with its corresponding supply outcome.

Final Logic:

Lower MC → Right; Regression → Left.

🧠 Memory Trick

Better Tech → Right | Worse Tech → Left

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Technology and Supply Shift

5 If wages increase, resulting in a new Marginal Cost (MC₁) compared to the original Marginal Cost (MC₀) at a specific output level Q, the mathematical relationship is:

A MC₁ > MC₀

B MC₁ < MC₀

C MC₁ = MC₀

D MC₁ = 0

💡 Short Explanation

Wages are variable production costs. Higher wages increase marginal cost. MC rises at every output level.

✅ Correct Answer Explanation

An increase in wage rates raises the cost of producing each additional unit of output because labour is a variable input. Therefore, MC₁ > MC₀ Hence, Option A is correct. Option B is incorrect because wages do not reduce MC. Option C is incorrect because production costs have changed. Option D is incorrect because marginal cost cannot become zero simply due to wage changes.

❓ Why Other Options Are Incorrect

Option B → MC₁ < MC₀

Wage increases raise, not reduce, marginal cost.

Option C → MC₁ = MC₀

Marginal cost changes when input prices change.

Option D → MC₁ = 0

Marginal cost remains positive.

🎯 Strategy

Used

Substitution

Application:

Apply the effect of higher wages directly to the marginal cost relationship.

Final Logic:

Higher Wage ⇒ Higher MC.

🧠 Memory Trick

Wage Up = MC Up

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Input Prices and Marginal Cost

6 An increase in the firm's average cost accompanied by an upward shift in marginal cost means the supply curve shifts _______, meaning at any given price, the firm supplies _______ units.

A Rightward; more

B Rightward; fewer

C Leftward; more

D Leftward; fewer

💡 Short Explanation

Higher costs increase marginal cost. Higher MC shifts the supply curve left. The firm supplies fewer units at every price.

✅ Correct Answer Explanation

When average cost and marginal cost increase, production becomes more expensive. Consequently, the firm is willing to supply less output at every given market price. Thus: Supply curve shifts leftward. Quantity supplied decreases. Hence, Option D is correct. Option A is incorrect because higher costs do not increase supply. Option B is incorrect because fewer units are supplied after a leftward, not rightward, shift. Option C is incorrect because a leftward shift does not increase output.

❓ Why Other Options Are Incorrect

Option A → Rightward; more

This occurs when production costs decrease.

Option B → Rightward; fewer

A rightward shift always represents greater supply.

Option C → Leftward; more

A leftward shift means lower quantity supplied.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Relate increasing production costs to the direction of the supply shift.

Final Logic:

Higher MC ⇒ Left Shift ⇒ Less Supply.

🧠 Memory Trick

Cost Up = Supply Left

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Cost Changes and Supply Curve

7 If a government imposes a unit tax of Rs 2 on production, and a firm produces and sells 10 units, what happens to the firm's total tax and long-run average cost (LRAC)?

A Total tax is Rs 10, LRAC increases by Rs 20

B Total tax is Rs 20, LRAC increases by Rs 2

C Total tax is Rs 20, LRAC decreases by Rs 2

D Total tax is Rs 12, LRAC increases by Rs 10

💡 Short Explanation

Unit tax applies to every unit produced. Total tax equals tax per unit × output. LRAC increases by the amount of the unit tax.

✅ Correct Answer Explanation

A unit tax of Rs 2 is charged on each unit. Therefore: Total Tax = 2 × 10 = Rs 20 Since the tax is imposed on every unit, LRAC increases by Rs 2 per unit. Thus, Option B is correct. Option A calculates the tax incorrectly. Option C wrongly states that LRAC decreases. Option D contains incorrect tax and LRAC values.

❓ Why Other Options Are Incorrect

Option A → Total tax is Rs 10, LRAC increases by Rs 20

Both values are incorrect.

Option C → Total tax is Rs 20, LRAC decreases by Rs 2

A tax raises production cost.

Option D → Total tax is Rs 12, LRAC increases by Rs 10

Neither figure is correct.

🎯 Strategy

Used

Substitution

Application:

Multiply the unit tax by output and apply the tax directly to LRAC.

Final Logic:

2 × 10 = 20; LRAC rises by Rs 2.

🧠 Memory Trick

Unit Tax × Units = Total Tax

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Effect of Unit Tax on Cost

8 Arrange the logical progression of effects after imposing a unit tax t:
1. Quantity supplied by the firm falls at every market price.
2. The government imposes a unit tax t on the good.
3. The firm's long-run supply curve shifts to the left.
4. The LRMC and LRAC increase by exactly Rs t.

A 2, 3, 4, 1

B 4, 3, 2, 1

C 2, 4, 3, 1

D 1, 2, 3, 4

💡 Short Explanation

Government imposes the tax. Production costs increase. Supply shifts left. Quantity supplied falls.

✅ Correct Answer Explanation

The correct sequence is: 1. Government imposes a unit tax. 2. LRMC and LRAC increase by the amount of the tax. 3. The firm's long-run supply curve shifts left. 4. The firm supplies fewer units at every market price. Therefore, the correct order is: 2 → 4 → 3 → 1 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → 2, 3, 4, 1

Costs increase before the supply curve shifts.

Option B → 4, 3, 2, 1

Begins with the consequence instead of the cause.

Option D → 1, 2, 3, 4

Starts with the final outcome.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Arrange the economic events in a logical cause-and-effect sequence.

Final Logic:

Tax → Higher Costs → Left Shift → Lower Supply.

🧠 Memory Trick

Tax → Cost → Left → Less

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Unit Tax and Supply

9 If the aggregate market supply is defined as
Sₘ(p) = ΣSᵢ(p) for n firms, and Sᵢ(p) = 0 for all firms when the price p is less than pₘᵢₙ, what is Sₘ(p) when p < pₘᵢₙ?

A Infinity

B 1

C 0

D n × p

💡 Short Explanation

No firm supplies below the minimum price. Every firm's supply equals zero. Market supply is also zero.

✅ Correct Answer Explanation

The market supply is obtained by summing the supplies of all firms: Sₘ(p) = ΣSᵢ(p) Since every firm's supply is zero when p < pₘᵢₙ, their sum is also zero. Thus, Sₘ(p) = 0 Hence, Option C is correct. Option A has no theoretical basis. Option B incorrectly assumes positive supply. Option D is unrelated to the definition of market supply.

❓ Why Other Options Are Incorrect

Option A → Infinity

Market supply cannot become infinite below the minimum supply price.

Option B → 1

No firm supplies output.

Option D → n × p

Market supply is the sum of quantities supplied, not a function of n × p.

🎯 Strategy

Used

Substitution

Application:

Substitute zero into the market supply equation for every firm.

Final Logic:

0 + 0 + 0 + ... = 0.

🧠 Memory Trick

All Zero = Market Zero

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Market Supply

10 Identify the accurate statements about horizontal summation of supply curves:
I. It adds the quantities supplied by all firms at each specific price level.
II. It adds the prices at each specific quantity level.
III. It is used to derive the market supply curve from individual supply curves.

A I and III only

B II and III only

C I only

D All of the above

💡 Short Explanation

Market supply is obtained by horizontal addition. Quantities are added at each price. Prices are not added together.

✅ Correct Answer Explanation

Evaluate the statements: Statement I: Correct. Horizontal summation means adding the quantities supplied by all firms at the same market price. Statement II: Incorrect. Prices are common to all firms and are not added. Statement III: Correct. Horizontal summation is used to construct the market supply curve. Therefore, Statements I and III are correct. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → II and III only

Statement II is incorrect because prices are not summed.

Option C → I only

Statement III is also correct.

Option D → All of the above

Statement II is false.

🎯 Strategy

Used

Elimination

Application:

Evaluate each statement separately using the concept of horizontal summation.

Final Logic:

Horizontal Summation = Add Quantities, Not Prices.

🧠 Memory Trick

Horizontal = Quantities Add

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Horizontal Summation of Supply Curves

11 Consider two firms where S₁(p) = p − 10 (for p ≥ 10) and S₂(p) = p − 15 (for p ≥ 15). If the current market price is p = 12, what is the aggregate market supply?

A 12

B 5

C 0

D 2

💡 Short Explanation

At p = 12, only Firm 1 supplies. Firm 2 has not reached its shutdown price. Market supply equals Firm 1's supply.

✅ Correct Answer Explanation

At p = 12: Firm 1: S₁(12) = 12 − 10 = 2 units. Firm 2: Since 12 < 15, Firm 2 supplies 0 units. Therefore, Aggregate Market Supply = 2 + 0 = 2 units. Hence, Option D is correct. Option A incorrectly treats price as quantity. Option B assumes both firms supply. Option C ignores Firm 1's positive supply.

❓ Why Other Options Are Incorrect

Option A → 12

Price is not the quantity supplied.

Option B → 5

Firm 2 does not produce at p = 12.

Option C → 0

Firm 1 supplies 2 units.

🎯 Strategy

Used

Substitution

Application:

Substitute p = 12 into both supply functions and add the outputs.

Final Logic:

2 + 0 = 2.

🧠 Memory Trick

Below 15 → Only Firm 1

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Market Supply from Individual Supply Functions

12 In a two-firm market, if the market price is greater than the shut-down price of Firm 1 but strictly less than Firm 2's shut-down price, the market supply curve coincides exactly with the supply curve of _______.

A Firm 2

B Firm 1

C The Government

D Neither firm

💡 Short Explanation

Firm 1 is producing. Firm 2 remains shut down. Total market supply equals Firm 1's supply.

✅ Correct Answer Explanation

When the market price is: Above Firm 1's shutdown price, Firm 1 supplies output. Below Firm 2's shutdown price, Firm 2 supplies zero output. Therefore, the total market supply is entirely provided by Firm 1. Hence, Option B is correct. Option A is incorrect because Firm 2 has not started production. Option C is unrelated. Option D is incorrect because Firm 1 is supplying output.

❓ Why Other Options Are Incorrect

Option A → Firm 2

Firm 2 is below its shutdown price.

Option C → The Government

Governments do not represent market supply curves.

Option D → Neither firm

Firm 1 is producing.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Identify which firms are active at the given price level.

Final Logic:

Only Active Firm Determines Market Supply.

🧠 Memory Trick

Only One Active = One Supply

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Market Supply with Multiple Firms

13 Match the cause with its effect on supply:

List 1	List 2
1. Entry of new firms	a. Market supply shifts right
2. Exit of existing firms	b. Market supply shifts left
3. Upward shift of the MC curve	c. Individual supply shifts left
4. Unit tax is imposed	d. Long run marginal cost increases

A 1-b, 2-a, 3-d, 4-c

B 1-a, 2-b, 3-c, 4-d

C 1-c, 2-d, 3-a, 4-b

D 1-d, 2-c, 3-b, 4-a

💡 Short Explanation

Entry increases market supply. Exit decreases market supply. Higher MC shifts individual supply left. Unit tax raises LRMC.

✅ Correct Answer Explanation

The correct matching is: 1 → a: Entry of firms increases market supply. 2 → b: Exit of firms decreases market supply. 3 → c: Higher MC shifts the firm's individual supply left. 4 → d: Unit tax increases long-run marginal cost. Therefore, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Entry and exit effects are reversed.
Option C → MC and tax effects are incorrectly matched.
Option D → All major relationships are mismatched.

🎯 Strategy

Used

Option Grouping

Application:

Match each economic event with its corresponding supply outcome.

Final Logic:

Entry → Right; Exit → Left; Tax → Higher LRMC.

🧠 Memory Trick

Entry Right | Exit Left

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Market Supply Shifts

14 Assuming the number of firms in the market is temporarily fixed for drawing a specific market supply curve, what structural change causes a definitive inward (leftward) shift of this aggregate curve?

A Technological advancement

B A decrease in input prices

C The exit of firms from the market

D A decrease in unit taxes

💡 Short Explanation

Exit reduces the number of producers. Total market output falls. Market supply shifts left.

✅ Correct Answer Explanation

When firms leave the industry: The number of producers decreases. The total quantity supplied at every price decreases. The market supply curve shifts to the left. Hence, Option C is correct. Option A increases supply. Option B lowers production costs and increases supply. Option D reduces costs and shifts supply right.

❓ Why Other Options Are Incorrect

Option A → Technological advancement

Technology shifts supply to the right.

Option B → A decrease in input prices

Lower costs increase supply.

Option D → A decrease in unit taxes

Lower taxes encourage greater production.

🎯 Strategy

Used

Elimination

Application:

Identify which option reduces total market supply.

Final Logic:

Firm Exit = Leftward Market Supply Shift.

🧠 Memory Trick

Exit = Left

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Market Supply Shift

📄 Passage

"The price elasticity of supply of a good measures the responsiveness of quantity supplied to changes in the price of the good. More specifically, it is defined as the percentage change in quantity supplied divided by the percentage change in price. Like the price elasticity of demand, the price elasticity of supply is also independent of units."

According to the passage, what does the price elasticity of supply mathematically represent?

A (ΔQ/ΔP) × (P/Q)

B (P/ΔQ) × (ΔP/Q)

C (ΔP/P) ÷ (ΔQ/Q)

D (Q/P) × (ΔP/ΔQ)

💡 Short Explanation

Elasticity measures responsiveness. It is based on percentage changes. The standard formula simplifies to the given expression.

✅ Correct Answer Explanation

From the passage: Price Elasticity of Supply = Percentage Change in Quantity Supplied ÷ Percentage Change in Price This can be written mathematically as: (ΔQ/Q) ÷ (ΔP/P) Rearranging, = (ΔQ/ΔP) × (P/Q) Therefore, Option A correctly represents the mathematical formula. Option B reverses the variables. Option C gives the reciprocal of elasticity. Option D is not a valid elasticity expression. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → (P/ΔQ) × (ΔP/Q)

The variables are arranged incorrectly.

Option C → (ΔP/P) ÷ (ΔQ/Q)

This is the reciprocal of the elasticity formula.

Option D → (Q/P) × (ΔP/ΔQ)

This does not represent price elasticity of supply.

🎯 Strategy

Used

Dimensional/Unit Analysis

Application:

Rewrite the percentage-change definition into its algebraic form.

Final Logic:

(%ΔQ ÷ %ΔP) = (ΔQ/ΔP) × (P/Q).

🧠 Memory Trick

ΔQ over ΔP × P over Q

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Formula for Price Elasticity of Supply

📄 Passage

Because the elasticity of supply is a ratio derived from percentage changes, the passage confirms that it is:

A Always equal to 1

B Dependent on the currency used

C Dependent on the weight metrics

D Independent of units of measurement

💡 Short Explanation

Elasticity is calculated using percentage changes. Percentage measures are unit-free. Therefore, elasticity is independent of units.

✅ Correct Answer Explanation

The passage clearly states that price elasticity of supply is independent of units because it is calculated as a ratio of percentage changes. Percentage changes eliminate the effect of measurement units such as kilograms, tonnes, litres, or rupees. Therefore, Option D is correct. Option A is incorrect because elasticity can be less than, equal to, or greater than one. Option B is incorrect because changing the currency does not change elasticity. Option C is incorrect because changing weight units also does not affect elasticity.

❓ Why Other Options Are Incorrect

Option A → Always equal to 1

Elasticity varies with the nature of the supply curve.

Option B → Dependent on the currency used

Percentage changes are unaffected by currency units.

Option C → Dependent on the weight metrics

Elasticity is independent of measurement units.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Locate the exact statement in the passage describing the nature of elasticity.

Final Logic:

Percentage Ratio ⇒ Unit-Free Measure.

🧠 Memory Trick

Percentage = No Units

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Price Elasticity of Supply

17 If a firm's quantity supplied increases from an initial 200 units to 1000 units, what is the value of ΔQ?

A 200

B 1000

C 800

D 1200

💡 Short Explanation

ΔQ means change in quantity. Change equals final quantity minus initial quantity. 1000 − 200 = 800.

✅ Correct Answer Explanation

The change in quantity supplied is calculated as: ΔQ = Final Quantity − Initial Quantity = 1000 − 200 = 800 units Hence, Option C is correct. Option A is only the initial quantity. Option B is the final quantity. Option D is obtained by incorrect addition.

❓ Why Other Options Are Incorrect

Option A → 200

This is the initial quantity supplied.

Option B → 1000

This is the final quantity supplied.

Option D → 1200

This incorrectly adds the two quantities.

🎯 Strategy

Used

Substitution

Application:

Substitute the given values into the formula ΔQ = Final − Initial.

Final Logic:

1000 − 200 = 800.

🧠 Memory Trick

Δ = New − Old

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Change in Quantity Supplied

18 Assertion (A): If the market price changes from an old price of Rs 10 to a new price of Rs 30, the percentage change is 200%.
Reason (R): The formula for percentage change in price uses the new price as the denominator:
((New Price − Old Price) / New Price) × 100

A Both A and R are false

B A is true, but R is false

C Both A and R are true, and R explains A

D A is false, but R is true

💡 Short Explanation

Percentage change uses the original value as the base. Price rises from Rs 10 to Rs 30. Percentage change equals 200%.

✅ Correct Answer Explanation

Evaluate both statements: Assertion (A): Correct. Percentage Change in Price = (30 − 10) / 10 × 100 = 20 / 10 × 100 = 200% Reason (R): Incorrect. The denominator should be the original (old) price, not the new price. Therefore, the Assertion is true, but the Reason is false. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Both A and R are false

The Assertion is correct.

Option C → Both A and R are true, and R explains A

The Reason uses the wrong denominator.

Option D → A is false, but R is true

The Assertion is correct.

🎯 Strategy

Used

Elimination

Application:

Verify the percentage change formula before evaluating the Assertion and Reason.

Final Logic:

Old Value is the Denominator.

🧠 Memory Trick

Old Value Below

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Percentage Change in Price

19 According to the geometric method, if a straight line supply curve is extended and it intersects the quantity-axis in its negative range (effectively cutting the positive price-axis), the elasticity at any point on that curve is _______.

A Exactly 0

B Exactly 1

C Less than 1

D Greater than 1

💡 Short Explanation

A positive price-axis intercept indicates elastic supply. Elasticity exceeds one. This is a standard NCERT geometric result.

✅ Correct Answer Explanation

For a straight-line supply curve: If the extension cuts the positive price-axis, the price elasticity of supply is greater than one at every point on the curve. Therefore, Option D is correct. Option A applies only to a vertical supply curve. Option B applies when the supply curve passes through the origin. Option C applies when the supply curve cuts the positive quantity-axis.

❓ Why Other Options Are Incorrect

Option A → Exactly 0

This represents perfectly inelastic supply.

Option B → Exactly 1

This occurs only when the supply curve passes through the origin.

Option C → Less than 1

This applies to a positive quantity-axis intercept.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Recall the geometric rules relating intercepts to elasticity.

Final Logic:

Price-Axis Intercept ⇒ Elasticity > 1.

🧠 Memory Trick

Price Axis = More than One

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Geometric Measurement of Price Elasticity of Supply

20 If a straight line supply curve cuts the positive quantity-axis at point M, and we evaluate elasticity at point S on the curve using the ratio (Mq₀)/(Oq₀) (where Mq₀ < Oq₀), what is the resulting elasticity?

A eₛ < 1

B eₛ > 1

C eₛ = 1

D eₛ = 0

💡 Short Explanation

The supply curve cuts the positive quantity-axis. The geometric ratio is less than one. Therefore, elasticity is less than one.

✅ Correct Answer Explanation

For a straight-line supply curve cutting the positive quantity-axis, the geometric method gives: eₛ = Mq₀ / Oq₀ Since the question states that: Mq₀ < Oq₀ the ratio is less than one. Therefore, eₛ < 1 Hence, Option A is correct. Option B applies to a positive price-axis intercept. Option C applies when the supply curve passes through the origin. Option D applies to a vertical supply curve.

❓ Why Other Options Are Incorrect

Option B → eₛ > 1

This occurs when the supply curve cuts the positive price-axis.

Option C → eₛ = 1

This occurs only when the supply curve passes through the origin.

Option D → eₛ = 0

This applies only to a perfectly inelastic (vertical) supply curve.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Use the geometric interpretation of elasticity based on where the supply curve intersects the axis.

Final Logic:

Positive Quantity-Axis Intercept ⇒ Elasticity < 1.

🧠 Memory Trick

Quantity Axis = Less than One

📚 Class XI – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Geometric Measurement of Price Elasticity of Supply

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