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

Multiple choice

Many times we read a term ‘Free Market’ in newspapers. What does it mean? (Pick the correct option's):(A) It is a market where pricing is driven by the laws of supply and demand. (B) In free market things are available without restraints of the government. (C) In such markets goods are free from extraneous influences such as tariff or quotas.

  1. Only (A)

  2. Only (B)

  3. Only (C)

  4. All (A), (B) and (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A free market is characterized by price determination through supply and demand, minimal government intervention, and the absence of trade barriers like tariffs or quotas. All three statements correctly describe its features.

Multiple choice

Which one is larger in size?

  1. Served market share

  2. Overall market share

  3. Both of the above are equal

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Served market share is the sales expressed as a percentage of the total market sales to its served market. Hence, it is larger in size.

Multiple choice

Cartel is a form of

  1. collusive oligopoly

  2. non collusive

  3. monopoly

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A cartel is an agreement between competing firms to control prices or exclude entry of a new competitor, which is a characteristic feature of a collusive oligopoly.

Multiple choice

Demand of a commodity mainly depends on

  1. desire to purchase

  2. power to purchase

  3. tax policy

  4. advertisement
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In economics, demand is defined as the desire to purchase a commodity backed by the ability to pay for it. Without the power to purchase, a desire is merely a wish.

Multiple choice

While prescription drugs have shown a steep and sustained increase in prices over the past few years, increase in price of over-the-counter drugs has rather been subdued.

Which of the following statements best explains the reason for the marked difference in the price trends of the two types of drugs?

  1. Over-the-counter drugs could enjoy the economy of scale.

  2. Over-the-counter drugs are more easily available.

  3. Sale of prescription drugs is brand dependent.

  4. Prescription drugs use some ingredients that need to be imported.

  5. What are prescription drugs today will become over-the-counter drugs tomorrow.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Prescription drugs being branded face lesser competition. OTC medications, on the other hand, face severe competition as a consumer can ask for any brand.

Multiple choice

The law of demand states that

  1. demand increases with increase in income

  2. when income and prices rise, demand also rises

  3. when price falls, demand increases

  4. when price increases, demand increases
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct Answer: when price falls, demand increases

Multiple choice

Few sellers dominate the market in ........ type of imperfect market.

  1. monopoly

  2. monopolistic

  3. dopoly

  4. oligopoly
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers. There are few sellers likely to be aware of the actions of the others. The decisions of one firm influence and are influenced by the decisions of other firms.

Multiple choice

Which one of the following statements is not correct?

  1. Normal goods have a positive income elasticity of demand.

  2. Inferior goods have a negative income elasticity of demand.

  3. Necessity has an income elasticity of demand that is less than one.

  4. Luxury goods have an income elasticity of demand that is equal to one.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In economics, a luxury good is a good for which demand increases more than proportionally as income rises and is a contrast to a necessity good for which demand is not related to income.

Multiple choice

Consumption possibility frontier is the same as

  1. the indifference curve

  2. the budget line

  3. the production possibility frontier

  4. the demand curve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A budget is a list of all planned expenses which uses a budget line to illustrate the trading.

Multiple choice

If the product is an inferior good, then

  1. demand is inversely related to the income

  2. demand is inversely related to the price

  3. demand is directly related to the price

  4. demand is inversely related to the price of substitutes
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

With inferior goods less is bought when income increases.