Economics · Commerce Accountancy
Microeconomics and Pricing
1,413 Questions
Microeconomics and pricing analyze market structures, consumer utility, marginal cost, and strategic pricing models like predatory pricing. These foundational economic concepts are regularly featured in civil services and state administrative examinations. Solve these practice questions to understand market equilibrium, demand elasticity, and competitive firm behavior.
Market equilibrium pricingIncome elasticity of demandMarginal cost conceptsUtility functions analysisPredatory pricing strategiesOligopoly market structures
Microeconomics and Pricing Questions
-
There is perfect competition in factor and commodity markets.
-
Production functions of both commodities are linear and homogenous of degree one.
-
There are two countries which trade with each other and analysis is geometrically based on both countries.
-
These two commodities are produced with only two factors, labour and capital.
-
The terms of trade between the two countries remain unchanged.
C
Correct answer
Explanation
No, as Stopler-Samuelson theorem is related on the assumption that there are two countries which trade with each other, but analysis is geometrically confined to one country.
Match the following:
| |
|
| Group - I |
Group - II |
| 1. Stopler-Samuelson theorem |
(i) The effect of factor endowment changes on trade |
| 2. Factor-price equalisation theory |
(ii) Partial factor-price equalisation |
| 3. Ohlin |
(iii) Movements in commodity prices to individual rewards |
| 4. Heckscher |
(iv) Movements in commodity prices to ratio of factor rewards |
| 5. Rybczynski |
(v) Absense of complete factor-price equalisaton |
-
1 - (iii), 2 - (v), 3 - (iv), 4 - (i), 5 - (ii)
-
1 - (iii), 2 - (iv), 3 - (ii), 4 - (v), 5 - (i)
-
1 - (iv), 2 - (iii), 3 - (v), 4 - (ii), 5 - (i)
-
1 - (iii), 2 - (iv), 3 - (v), 4 - (i), 5 - (ii)
-
1 - (iv), 2 - (iii), 3 - (i), 4 - (v), 5 - (ii)
B
Correct answer
Explanation
All are correctly matched.
Match the following:
| |
|
| Group - I |
Group - II |
| 1. Purchasing Power Parity theory |
(i) Dorrance |
| 2. Income terms of trade |
(ii) Linder |
| 3. Real cost terms of trade |
(iii) Gustav Cassel |
| 4. Demand pattern |
(iv) Viner |
-
1 - (i), 2 - (ii), 3 - (iii), 4 - (iv)
-
1 - (iii), 2 - (i), 3 - (iv), 4 - (ii)
-
1 - (iv), 2 - (iii), 3 - (ii), 4 - (i)
-
1 - (iii), 2 - (i), 3 - (ii), 4 - (iv)
-
1 - (i), 2 - (iii), 3 - (iv), 4 - (ii)
B
Correct answer
Explanation
These options are correctly matched.
Match the following:
| |
|
| Group - I |
Group - II |
| 1. J-curve effect |
(i) Sydney-Alexander |
| 2. Indirect effect of money transfer |
(ii) Marshall-Lerner |
| 3. Inter-commodity substitution |
(iii) Ohlin |
| 4. Absorption approach |
(iv) Lipsey |
-
1 - (ii), 2 - (iii), 3 - (iv), 4 - (i)
-
1 - (ii), 2 - (iv), 3 - (iii), 4 - (i)
-
1 - (i), 2 - (iii), 3 - (iv), 4 - (ii)
-
1 - (ii), 2 - (iii), 3 - (i), 4 - (iv)
-
1 - (iv), 2 - (iii), 3 - (ii), 4 - (i)
A
Correct answer
Explanation
These are correctly matched.
J-curve effect is concerned with Marshall-Lerner. Devaluation makes the BOP worse in short-run and then, improves it in the long run. This traces a J-shaped curve through time and this is known as the J-curve effect of devaluation.
Ohlin explains an indirect effect of money transfer. The debtor country repays its debts. With reduction in purchasing power, the demand for domestic goods and imports falls.
-
many buyers but one seller
-
price discrimination
-
product differentiation
-
homogeneous product
-
maximum
-
minimum
-
average
-
variable
B
Correct answer
Explanation
Option (2) is correct: A reserve price is a hidden minimum price that the seller is willing to accept for an item.
-
When suppliers are concentrated<o:p></o:p>
-
When suppliers cannot integrate downstream<o:p></o:p>
-
When supplier switching cost is low<o:p></o:p>
-
When supplied product is not an important input<o:p></o:p>
A
Correct answer
Explanation
When suppliers are concentrated or organised they have a high bargaining power. Hence, this is the right answer.
-
Pure competition<o:p></o:p>
-
Monopolistic competition<o:p></o:p>
-
Oligopoly<o:p></o:p>
-
Monopoly<o:p></o:p>
A
Correct answer
Explanation
Beer and cigarette industry are an example of pure competition as there are many firms that provide the product.
-
Oligopoly
-
Bureaucratization
-
Professionalization
-
Oligarchy
A
Correct answer
Explanation
Oligopoly is the market structure characterized by few sellers who dominate the industry. Examples include automobile, telecom, and airline industries where a small number of firms control most of the market share.
A
Correct answer
Explanation
The objective function establishes the mathematical relationship between decision variables and the goal to be optimized. For example: Z = 3x₁ + 5x₂ shows how variables x₁, x₂ determine the objective value Z.
A
Correct answer
Explanation
Surplus variables represent excess over minimum requirements in greater-than-or-equal-to constraints. Subtracting them from the left-hand side converts inequality constraints (≥) into equality constraints for simplex method.
A
Correct answer
Explanation
In the standard form of linear programming problems, slack and surplus variables are mathematical constructs with no economic value or cost. Therefore, their coefficients in the objective function are always zero.
-
zero
-
negative
-
positive
-
same
A
Correct answer
Explanation
Total revenue is maximized when marginal revenue (MR) reaches zero because adding one more unit neither increases nor decreases total revenue. When MR is positive, TR increases; when negative, TR decreases.
-
unity
-
negative
-
zero
-
positive
A
Correct answer
Explanation
Marginal revenue equals zero when price elasticity of demand equals unity (1). At this point, total revenue is maximized as the percentage change in quantity demanded exactly offsets the percentage change in price.
-
declining demand
-
latent demand
-
negative demand
-
unwholesome demand
C
Correct answer
Explanation
The demand for surgery is negative because a customer can opt for alternative eg. medicines and thereby demand for surgery is reduced.