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

Elasticity of demand indicates

  1. change in quantity demanded

  2. rate of change in quantity demanded

  3. change in income

  4. change in prices
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Elasticity of demand measures the responsiveness or the rate of change in quantity demanded of a good in response to a change in its price. It is defined as the percentage change in quantity demanded divided by the percentage change in price.

Multiple choice

When demand is inelastic, an increase in the price of a commodity would cause the total expenditure of the consumers to

  1. increase

  2. decrease

  3. first increase and then decrease

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

When demand is inelastic, consumers are less sensitive to price changes. Therefore, if the price increases, the percentage decrease in quantity demanded is smaller than the percentage increase in price, leading to an increase in total expenditure.

Multiple choice

An ABC analysis shows that

  1. the maximum proportional value of the inventory is made up by a small number of items

  2. the maximum proportion value of the inventory is made up by a large number of items

  3. both 1 and 2

  4. neither 1 nor 2
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

ABC analysis is based on the Pareto principle, where a small number of items (A) account for the majority of the total inventory value.

Multiple choice

Directions: Choose the correct option for the given question.

Key factor is taken into consideration to judge the _____ of different products, whenever there is any shortage.

  1. liquidity

  2. profitability

  3. stability

  4. consistency

  5. financial position
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A key factor (or limiting factor) is a constraint that limits the volume of production or sales. Identifying this factor helps management prioritize products that offer the highest contribution per unit of that limiting factor, thus maximizing profitability.

Multiple choice

Which of the following statements is incorrect about market-sharing cartels?

  1. Two firms enter into a market-sharing agreement on the basis of the quota system.

  2. Each firm produces and sells a heterogeneous product which is not a perfect substitute for each other.

  3. There are large number of buyers.

  4. Each firm has its own demand curve having the same elasticity as that of the market demand curve.

  5. Cost curves of the two firms are identical.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This point is not true because according to the assumption of market-sharing cartel, each firm produces and sells a homogeneous product.

Multiple choice

Which of the following statements is incorrect about low-cost price leadership model in an oligopolistic firm?

  1. There are two firms.

  2. There are few buyers.

  3. They have identical demand and marginal revenue curves.

  4. The market industry demand curve for the product is known to both the firms.

  5. The costs of the firms differ; one is a low-cost firm and the other is a high-cost firm.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This option is incorrect because low-cost price leadership model in an oligopolistic firm assumes that there are large number of buyers.

Multiple choice

Which of the following is false for Clark's Product Exhaustion approach?

  1. There is perfect competition in product markets as well as factor markets.

  2. Prices and wages are manipulated by collusive agreements.

  3. There is a single wage rate for all occupations.

  4. The same commodities are produced in the same quantities and by the same methods.

  5. The quantity of each factor is given.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Clark's Product Exhaustion theorem is based upon the assumption that the prices as well as wages are not manipulated by government action or collusive agreements. This is the correct answer.

Multiple choice

Match the following.

 
List - I List - II
1. Price Theory and Oligopoly (i) J. F. Due
2. The Nature of Capital and Income (ii) A. C. Pigou
3. Government Finance - Economics of Public sector (iii) K. W. Rothschild
4. The Economics of Welfare (iv) I. Fisher

  1. 1 - (i), 2 - (iii), 3 - (iv), 4 - (ii)

  2. 1 - (iv), 2 - (iii), 3 - (i), 4 - (ii)

  3. 1 - (ii), 2 - (iv), 3 - (i), 4 - (iii)

  4. 1 - (iii), 2 - (iv), 3 - (i), 4 - (ii)

  5. 1 - (i), 2 - (iv), 3 - (iii), 4 - (ii)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Price Theory and Oligopoly was introduced by K.W. Rothschild. The Nature of Capital and Income was introduced by I. Fisher. Government Finance - Economics of Public sector was propounded by John F. Due. The Economics of Welfare was introduced by A.C. Pigou.

Multiple choice

Match the following ||| |---|---| | List - I| List - II| |1. The theory of market economy|(i) Simon| |2. Demand under conditions of oligopoly|(ii) Barle and Means| |3. The modern corporation and private property|(iii) Sweezy| |4. Theories of decision making in economics and behavioural science |(iv) Stackelberg|

  1. 1 - (i), 2 - (iii), 3 - (iv), 4 - (ii)

  2. 1 - (iv), 2 - (iii), 3 - (ii), 4 - (i)

  3. 1 - (iii), 2 - (iv), 3 - (ii), 4 - (i)

  4. 1 - (i), 2 - (ii), 3 - (iii), 4 - (iv)

  5. 1 - (iv), 2 - (iii), 3 - (i), 4 - (ii)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

"The theory of market economy" was introduced by H. V. Stackelberg in 1952. "Demand under conditions of oligopoly" was propounded by Paul M. Sweezy in 1939. "The modern corporation and private property" was suggested by A. A. Barle and G. Means in 1932. "Theories of decision making in economics and behavioural science" was propounded by H. A. Simon in 1959.

Multiple choice

Match the following.

 
Group - I Group - II
1. Analysis of differentiated oligopoly (i) Andrews
2. Costing margin (ii) G. Dantzig
3. Cartels (iii) Sylos
4. Linear programming (iv) Fellner

  1. 1 - (iv), 2 - (ii), 3 - (i), 4 - (iii)

  2. 1 - (iii), 2 - (i), 3 - (iv), 4 - (ii)

  3. 1 - (i), 2 - (ii), 3 - (iii), 4 - (iv)

  4. 1 - (iv), 2 - (iii), 3 - (ii), 4 - (i)

  5. 1 - (iv), 2 - (i), 3 - (ii), 4 - (iii)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Analysis of differentiated oligopoly was propounded by Sylos. Andrews introduced the concept of costing margin. The concept of cartels is associated with W. Fellner. Linear programming is related to George Dantzig.