The Supreme Court yesterday refused to revive a lawsuit against the city of Jackson, Miss., stemming from the 1970 shooting deaths of two black students at Jackson State College.

By a 7-to-2 vote, the court let stand a decision ending the claims for monetary damages in the police shooting. Justices William J. Brennan Jr. and Thurgood Marshall voted to hear arguments in the case, but four votes are needed to grant such review.

The suit acted on yesterday was filed by relatives of the two slain students and by three black students who were among at least 12 wounded in the May 15, 1970, shooting, which followed several disturbances at the predominantly black college.

Members of a contingent of 69 officers from the Mississippi Highway Safety Patrol and the city police department fired on the students. The officers who fired at a 900-student women's dormitory allegedly were under the city's control.

In 1974, the 5th U.S. Circuit Court of Appeals upheld a jury decision denying an award of monetary damages. The court ruled there was insufficient evidence as to exactly which officer shot each student, and that the city and state were immune from the lawsuit.

Last July, the 5th Circuit court refused to revive the case, even though the Supreme Court ruled in 1978 that cities could be sued for monetary damages in similar circumstances.

In other action yesterday:

* The Supreme Court once again steered clear of a legal controversy sparked by a city's use of racial quotas in awarding government contracts.

The justices, by an 8-to-1 vote, refused to revive a Birmingham, Ala., ordinance that required all construction contractors on city projects to give 10 percent of all subcontracted jobs to minority-owned firms.

The Alabama Supreme Court struck down the 1977 ordinance last Aug. 21, stating that it fostered unlawful racial discrimination against whites. Only Justice Brennan voted to review the state court's ruling.

* The Supreme Court left intact a $1.7 million fine against Reader's Digest stemming from the magazine company's mass-mailings of allegedly misleading contest materials. The court, without comment, let stand a ruling that Reader's Digest violated a 1971 settlement with the Federal Trade Commission.

The agreement barred Reader's Digest from "using or distributing simulated checks, currency, 'new car certificates' or . . . any confusingly simulated item of value" in its mass-mail sweepstakes solicitations.

The Reader's Digest Sweepstakes is a massive mail solicitation that promises money or merchandise to some proportion of those who return the sweepstakes entry forms.

* The court agreed to clear up a controversy over corporate federal income tax deductions.

The justices said they will review a ruling that an Arizona dairy firm was not required to include as income in one year the value of cattle feed for which it previously had taken a deduction, but had not used up by the time the company liquidated its assets.

The justices also will review a similar legal dispute involving the Hillsboro National Bank of Hillsboro, Ill., which resulted in a conflicting ruling.

* The court rejected the appeal of Dr. Milton Margoles, a physician who sued a Milwaukee Sentinel reporter for allegedly telling a congressman's staff the doctor ran an "abortion palace."

Without comment, the justices refused to consider Margoles' argument that the judge who originally threw out his slander suit--U.S. District Court Judge Robert Warren of Milwaukee--should have removed himself from the case because of conflict of interest.

The action leaves intact lower court decisions that dismissed the slander suit on grounds that Margoles, a former Milwaukee physician, intentionally withheld documents needed by the trial court.

Margoles, once convicted of tax evasion and obstruction of justice, received a presidential pardon from Richard M. Nixon in 1972. Rep. Robert McClory (R-Ill.) introduced a bill in Congress asking for $195,000 in compensation for Margoles because of alleged misconduct by the Internal Revenue Service in pursuing its case against the physician.