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 social science index number value and price important index numbers price rise/inflation

Company will face low sales and low markups if company sets its product prices _____.

  1. Too high

  2. Too low

  3. Too discount

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

If any company sets the price of its product or service too high, in the sense it is higher than others, even if they aren't compromising on other factors such as quality etc, the company will face low sales and low markup by the consumers. That is because the consumers will tend to buy from ones who have lesser prices at the best opportunity cost of other factors.

Multiple choice business organisation and correspondence transport: economic and social importance and kinds of transport modes and choice of transportation meaning and definition of transport transport services

Transport helps in stabilization of price.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Transport helps in stabilization of price. Transport exerts considerable influence upon the stabilization of the prices of several commodities by moving commodities from surplus to deficit areas.

Prices are also reduced because of the facilities offered by transport for large-scale production.
It is important to producers or manufacturers, retailers, and consumers. The various modes of transportation in this country are Rail, Water, Road, Pipeline, and Air transport.

 Factors affecting the choice of transportation mode are: the nature of goods, customer wishes, speed, simplicity, price, and supporting functions.

Multiple choice economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

AD Curve starts ____________.

  1. From the origin

  2. Point Below the origin

  3. Point above the origin

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

Aggregate demand curve is upward sloping showing a positive relation between level of income and overall expenditure in the economy. The curve intercepts on Y-axis because even at zero level of income, there is some consumption which is required for the very existence of life. 

Multiple choice economics consumption and investment functions determinants of consumption function and savings function production, consumption, saving and economic units ex ante and ex post

Which of the following is not true about AD in a two-sector economy?

  1. AD = Consumption + Saving

  2. AD curve starts from some point above the origin

  3. AD = Consumption + Investment

  4. AD curve has a positive slope
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The aggregate demand in two sector economy only includes the expenditure made by the consumer sector and the producer sector. The expenditure by the government sector and net exports are not included in the two sector economy. 

Multiple choice business mathematics and statistics index numbers weighted methods to calculate index numbers construction of index numbers applied statistics

The following commodities have the given price indices relative to a base of $100$. The weights are also given:

Commodity Relative Index Weight
Butter 181 4
Bread 116 12
Tea 110 3
Bacon 152 7

Calculate the new index for this set of commodities

  1. $132$
  2. $133$
  3. $134$
  4. $135$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

New index $=\cfrac { \sum _{ i=1 }^{ 4 }{ { \left( \text{Relative index }\right)  } _{ i } } \times { \left( \text{Index no. Weight }\right)  } _{ i } }{ \sum _{ i=1 }^{ 4 }{ { \left( \text{weight }\right)  } _{ i } }  } $
$=\cfrac { 181\times 4+116\times 12+110\times 3+152\times 7 }{ 4+12+3+7 } $
$=\cfrac { 724+1392+330+1064 }{ 26 } $
$=\cfrac { 3510 }{ 26 } =\cfrac { 1755 }{ 13 } $
$=135$

Multiple choice economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

If factor cost is greater than market price, then it means that ____________________.

  1. Indirect Taxes$ >$ Subsides
  2. Indirect Taxes $=$ Subsidies
  3. Indirect Taxes $<$ Subsides
  4. Indirect Taxes $\ge$ subsidies
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If factor cost is greater than market price, then it means Indirect taxes < Subsidies. Market price can be less than factor cost when subsidies will be more than the indirect tax.

Formula: Market price - indirect tax + subsidies = Factor cost

Multiple choice economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

In Dx$=$f(Px, T, Y)Y is?

  1. Income level of consumer

  2. Tastes of consumer

  3. Quantity of demand of goods

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

In the demand function Dx = f(Px, T, Y), Px is the price of the good, T represents consumer tastes, and Y represents the income level of the consumer.

Multiple choice economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

If there is a simultaneous fall in consumers disposal income as well as number of suppliers of a product in the market, the _________.

  1. equilibrium quantity will decrease

  2. equilibrium price will decrease

  3. equilibrium price will go up

  4. equilibrium quantity will increase
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A fall in disposable income decreases demand (shifting the demand curve left), and a fall in the number of suppliers decreases supply (shifting the supply curve left). Both shifts lead to a decrease in equilibrium quantity.

Multiple choice economics circular flow of income and methods of calculating national income some macroeconomic identities national income accounting national income aggregates

National product at market prices is higher than national product at factor cost by the amount of ____________.

  1. subsidy

  2. indirect taxes + subsidies

  3. indirect taxes

  4. indirect taxes - subsidies
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

National product at market price includes indirect taxes and excludes subsidies compared to factor cost. Thus, Market Price = Factor Cost + Indirect Taxes - Subsidies.

Multiple choice organisation of commerce and management channels of distribution elements of marketing mix middlemen physical distribution and channels

Intensive distribution methods are usually adopted in the case of ______.

  1. luxury goods

  2. convenience goods

  3. inferior goods

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Intensive distribution aims to stock products in as many outlets as possible. This is typical for convenience goods, which consumers expect to find easily without much effort.

Multiple choice mathematical modelling proof by contradiction similar triangles

A simple market model is an example of

  1. Static physical model

  2. Dynamic physical model

  3. Static mathematical model

  4. Dynamic mathematical model
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In $simple-market-model$  generally there is a balance between supply and demand. Both factors depend on price. Demand for the commodity will be low when the price is high and it will increase as the price drops. If we take the simplistic linear case the relationship between demand (𝑄) and price (𝑃) might be represented by the straight line.


Therefore,  $simple-market-model$  is a $static-mathematical-model$ as it doesn't vary with time.

Multiple choice business organisation and correspondence middlemen 1 - wholesaler characteristics, necessity, services and survival of a wholesaler the characteristics of wholesalers wholesalers characteristics of wholesale trade kinds of mercantile agents or agent middlemen

Wholesalers increase the cost of marketing and price of the products goes up. State whether this is an argument which favors elimination of wholesalers.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Elimination of Wholesalers:

1. Wholesalers are middlemen between the manufacturers and the retailers. They increase the cost of marketing and price of the products goes up. The consumers have to pay higher price. By eliminating wholesalers, prices of the products will decrease and the consumer shall benefit. The manufacturers will be earning more profit on account of lesser prices of the products.

2. Wholesalers are unnecessary links between manufacturers and retailers. Their presence in the distribution channel obstructs the smooth and quick delivery of goods from the manufacturers to the ultimate consumers. If they are eliminated, the unrestricted supply of goods takes place from the manufacturers to the retailers and the consumers.

3. During the slack seasons and scarcity in business activities demand, the wholesalers resort to hoarding and stocking of goods and sell them at exorbitant prices charging excessive profits.

4. In certain regions, the wholesaler is the sole distributor of the product. He occupies the monopolistic position and exploits both the retailers and the consumers by charging higher prices if the wholesalers are eliminated it would be in the best interest of both the retailers and the consumers.

5. Big and established retailers such as large departmental stores can afford to make their own purchases directly from the manufacturers without approaching the wholesaler. The wholesalers are easily eliminated.

Multiple choice economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

____ refers to that period in which supply of a commodity can be increased or decreased depending upon changed condition of demand. 

  1. Very short period

  2. Short period

  3. Long period

  4. Very long period
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The long period provides sufficient time for firms to adjust their production capacity in response to changes in market demand, making supply more elastic.

Multiple choice economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

Law of Returns to Scale indicates the responsiveness of total product when all inputs ________________.

  1. Remain same

  2. Are changed drastically

  3. Are changed marginally

  4. Are changed proportionately
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Returns to Scale examines the relationship between output and inputs when all inputs are changed in the same proportion. It describes the long-run production function.