Economics · Commerce Accountancy

Microeconomics and Pricing

1,364 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

The term 'Price Rigidity' is a feature of

  1. perfect competitive market

  2. monopoly

  3. oligopoly

  4. monopolistic competition

  5. imperfect competition
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is a situation in which a particular market is controlled by a small group of firms.

Multiple choice

If both the supply and the demand show good increase, the market price will ____________.

  1. rise only in the case of an inelastic supply function

  2. fall only in the case of an inelastic supply function

  3. not be predictable with only these facts

  4. rise only in the case of an inelastic demand function

  5. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is correct answer, because without additional information about the extent of the change, the effect on price is not determinable.

Multiple choice

The requirement is to identify which of the situations indicates inelastic demand. Elasticity of demand is measured by the percentage change in the quantity demanded divided by the percentage change in price. If the quotient is greater than one, demand for product is price elastic, and if it less than one, demand for the product is price inelastic. A quotient of exactly one indicates unitary elasticity. In which of the following situations would there be inelastic demand?

  1. A 5% price increase results in 3% decrease in the quantity demanded.

  2. A 4% price increase results in a 6% decrease in the quantity demanded.

  3. A 4% price increase results in a 4% decrease in the quantity demanded.

  4. A 3% price decrease results in 5% increase in the quantity demanded.

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

Correct, because the price elasticity quotient is equal to 0.6 (3%/5%).

Multiple choice

The requirement is to determine the immediate effect on one product of an increase in the price of a substitute good. The demand and price of substitute products are directly related. If the price of a good increases, the demand for its substitute will also increase. X and Y are substitute products. If the price of product Y increases, the immediate impact on product X is ____________.

  1. price will increase

  2. quantity demanded will increase

  3. quantity supplied will increase

  4. price, quantity demanded and supply will increase

  5. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Correct, because the demand and price of substitute products are directly related. If the price of a good increases, the demand for its substitute will also increase. It depicts this relationship.

Multiple choice

The requirement is to apply the concept of price-elasticity of demand. If demand is inelastic an increase in price will increase total revenue. As a business owner if one has determined that the demand for his product is inelastic. Based upon this assessment it is understood that _________.

  1. increasing the price of the product will increase total revenue

  2. decreasing the price of the product will increase total revenue

  3. increasing the price of the product will have no effect on total revenue

  4. increasing the price of your product will increase competition

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

Correct, because it accurately states the rule that if demand is inelastic an increase in price will increase total revenue.

Multiple choice

The requirement is to identify the price elasticity of an essential product with no substitutes. In the pharmaceutical industry where a diabetic must have insulin no matter the cost and where there is no other substitute, the diabetic’s demand curve is best described as ___________.

  1. perfectly elastic

  2. perfectly inelastic

  3. elastic

  4. inelastic

  5. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Demand for the product is perfectly inelastic because the diabetic will purchase the product regardless of the price.

Multiple choice

The requirement is to describe market conditions in a competitive market when both demand and supply increase. In a competitive market, the market will always clear at the equilibrium price. If there is an equal increase in both demand and supply, the equilibrium price may increase, decrease or remain the same. However, there will be more units sold. In any competitive market, an equal increase in both demand and supply can be expected to always ____________.

  1. increase both price and market-clearing quantity

  2. decrease both price and market-clearing quantity

  3. increase market-clearing quantity

  4. increase price

  5. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a competitive market, the market will always clear at the equilibrium price. If there is an equal increase in both demand and supply, the equilibrium price may increase, decrease or remain the same. However, there will be more units sold.

Multiple choice

The requirement is to identify the effect on total revenue of a decrease in price of a price elastic product. If a product’s demand is elastic and there is a decrease in price, the effect will be ___________.

  1. a decrease in total revenue

  2. no change in total revenue

  3. a decrease in total revenue and the demand curve shifts to the left

  4. an increase in total revenue

  5. none of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Correct, because if a product’s demand is price elastic, a decrease in price will lead to an even larger percentage increase in quantity demanded. Therefore, the total revenue will increase.

Multiple choice

The requirement is to describe the law of diminishing marginal utility. The law states that marginal utility declines as consumers acquire more of a particular good. The law of diminishing marginal utility states that ___________.

  1. marginal utility will decline as a consumer acquires additional units of a specific product

  2. total utility will decline as a consumer acquires additional units of a specific product

  3. declining utilities causes the demand curve to slope upwards

  4. consumers want will diminish with the passage of time

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

The law states that marginal utility declines as consumers acquire more of a particular good.

Multiple choice statistics time series moving average and variation simple moving average

For 10 observations on price (x) and supply (y), the following data was obtained: $\sum x = 130, \sum y = 220, \sum x^2 = 2288, \sum y^2 = 5506$ and $\sum xy = 3467$. 
What is the line of regression of y on x?

  1. $y = 0.91 x + 8.74$
  2. $y = 1.02x + 8.74$
  3. $y = 1.02 x - 7.02$
  4. $y = 0.91 x - 7.02$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Line of regression of $y$ on $x$ is : $y - \overline{y} = b_{yx} (x - \overline{x})$ where $\overline{y}$ and $\overline{x}$ are mean values.
$\therefore \overline{y}=22, \overline{x}=13$ as $n=10$

Also, $b_{yx}=r\dfrac{\sigma_y}{\sigma_x}$

$\therefore r= \dfrac{n\sum-(\sum x)(\sum y)}{\sqrt{[n\sum x^2-(\sum x)^2][n\sum y^2-(\sum y)^2]}}=0.962$

$\sigma_y=8.2$ and $\sigma_x=7.73$

$\therefore b_{yx}=1.02$

$\therefore y=1.02x+8.74$ is the required line of regression.
Multiple choice economics fundamental concepts and terminologies savings, investment, wealth, welfare and business cycle fundamental duties and directive principles fundamental duties and directive principles of state policy

When we say that the Demand for a commodity depends upon the money income of the Consumer, we are referring to -

  1. Income Effect

  2. Substitution Effect

  3. Demonstration Effect

  4. Utility Effect
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The income effect describes how a change in a consumer's real income, due to a change in the price of a commodity, affects the quantity demanded.

Multiple choice business organisation and correspondence classification of busniess activities business as an activity meaning and types of trade trade and aids to trade

_______ helps in bring about stable and uniform prices indifferent markets as traders are able to equalize the supply of goods at different places according to demand.

  1. Transport

  2. Warehousing

  3. Banking

  4. Insurance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Transportation is a major contributor to the economy and a competitive force in business. It is the activity that physically connects the business to its supply chain partners, such as suppliers and customers, and is a major influence on the customer's satisfaction with the company.

Multiple choice business mathematics and statistics applications of calculus revenue functions from marginal revenue functions minimization of cost function and maximization of revenue function and profit function integral calculus – ii

The demand function if $p = 60 + 2D - 10D^2$, the rate of charge in price with respect to demand is ______

  1. $\dfrac{60}{D} + 2 - 10D$
  2. $2 - 20D$
  3. $2 - 40D$

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

The rate of change of price with respect to demand is the derivative dp/dD. Differentiating p = 60 + 2D - 10D² term by term gives dp/dD = 0 + 2 - 20D = 2 - 20D. Option A incorrectly divides 60 by D, and Option C has an incorrect coefficient.