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 business mathematics and statistics applications of calculus marginal income and marginal cost to find the maximum profit if marginal revenue and marginal cost function are given: integral calculus – ii

The demand function of a monopolist is given by $p=1500-2x-x^2$. Find the marginal revenue when $x=10$.

  1. $1170$
  2. $1160$
  3. $1150$

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

$\Rightarrow$  We have, $p=1500-2x-x^2$

$\Rightarrow$  Revenue Function   $R=p\times x$
$\therefore$       $R=1500x-2x^2-x^3$.
$\Rightarrow$   Marginal revenue = $\dfrac{d}{dx}R$

$\Rightarrow$   Marginal revenue = $\dfrac{d}{dx}(1500x-2x^2-x^3)$ 

$\Rightarrow$   Marginal revenue = $1500-4x-3x^2$
$\Rightarrow$   Now, substitute $x=10$.
$\Rightarrow$   Marginal revenue = $1500-2(100)-3(100)^2=1160$
$\therefore$   Marginal revenue is $1160$.

Multiple choice business mathematics and statistics applications of calculus marginal income and marginal cost to find the maximum profit if marginal revenue and marginal cost function are given: integral calculus – ii

If the demanding Law is given by $q = \dfrac{20}{p+1}$, find the elasticity of demand with respect to price at the point when $p = 3.$

  1. $\dfrac43$
  2. $-\dfrac34$
  3. $\dfrac23$
  4. $-\dfrac32$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Elasticity of demand $=\cfrac{\cfrac{dq}{q}}{\cfrac{dp}{p}}=-\cfrac{p}{(p+1)}$
When $p=3$
Elasticity of demand $=-\cfrac{3}{4}$
Multiple choice business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

Answer the following question.
Primary and secondary markets _______.

  1. Compete with each other

  2. Complement each other

  3. Function independently

  4. Control each other
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Primary market deals with the issue of new securities. That is, through the primary market a company raises capital directly from the borrowers. That is, once the securities are issued in primary market, they are then traded in the secondary market. It is in this sense that both the markets complement each other

Multiple choice elements of business large scale retail trade forms of large scale retail stores types of retail organisation types of retailing

The ________  may raise costs in super markets.

  1. lack of personal attention

  2. requirement of huge capital

  3. high overhead expenses

  4. mishandling of goods by customers
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

One of the most basic reasons companies raise prices on their products and services is to adjust to increased business costs. A product reseller, for instance, might raise prices simply because its supplier raised prices on materials or finished goods.

Multiple choice elements of business large scale retail trade forms of large scale retail stores types of retail organisation types of retailing

Why are the prices of goods lower in super markets than in other retail stores?

  1. Because of bulk purchasing.

  2. Low profit margins.

  3. Both A and B

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

A super market is a large retailing business unit selling wide variety of consumer goods on the basis of low margin appeal, wide variety and assortment, self-service and heavy emphasis on merchandising appeal.

The prices of the products are generally lower than other types of retail stores because of bulk purchasing, lower operational cost, and low profit margins.

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

Demand price is identical with __________.

  1. AR

  2. MR

  3. TR

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

Average revenue refers to the revenue per unit of output sold. It is obtained by dividing the total revenue by the number of units. AR is equal to per unit sale receipts and price is always per unit. Since sellers receive revenue according to the price, price and AR are one and the same thing.

TR= Quantity * Price

AR= TR/ Quantity

AR= (Quantity * price)/ quantity

AR= Price

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

When price discrimination extends to two or more countries it is called __________.

  1. dumping

  2. differentiation

  3. dual pricing

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

Dumping is, in general, a situation of international price discrimination where the price of a product which is sold to the importing country is less than the price of the same product when sold in the market of the exporting country. It is generally perceived that dumping would result in unfair trade.

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

Long run determinant of price, is equal to ______.

  1. marginal utility

  2. market forces

  3. cost of production

  4. brand value
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is believed in long run production function,total revenue is equal to total cost . There is no extra normal profit or abnormal loss.Thus , in long run price of the product is equal to the cost of production.

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

The price which a consumer would be willing to pay for a commodity equals to his ________.

  1. Total utility

  2. Marginal utility

  3. Average utility

  4. Does not have any relation to any of the above options
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The price which a consumer pays for a commodity is always less than what he is willing to pay for it, so that the satisfaction which he gets from its purchase is more than the price paid for it and thus he derives a surplus satisfaction which Marshall calls Consumer’s Surplus (CS). 

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

The internal factors which governing the prices are _________________.

  1. The costs and the management policy

  2. The elasticity of demand and supply

  3. The goodwill of the company

  4. The government policy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

There are certain factors which govern the prices. Internal and external factors. Internal factors are the ones which are caused internally in the organization due to certain policies set by the firm. Thus the cost and management policies influence the prices. 

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

The fundamental elements in the price- setting process is ________________.

  1. Cost data

  2. Demand elasticity

  3. Managerial ability

  4. Wages and Salaries
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The main element in the price-setting process of a product is the cost data of the product. This is because for any producer, it is first important to cover up the cost of making the good and then add a profit margin to set the appropriate price. Thus, it is important to cover the cost so that the firm does not incur a loss.

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

Real value of a commodity is ________.

  1. the amount of other goods which have to be given up in order to get it.

  2. its exchange value

  3. its total utility

  4. its cost of production.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

At the time of barter system, commodities were exchanged for commodities. But after the introduction of money, the concept of opportunity cost came up where the real value of a commodity is measured in terms of the next best alternative that needs to be sacrificed to buy the commodity.

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

The paradox of value means that _____________________.

  1. people are irrational in consumption choices

  2. the total utilities yielded by commodities do not necessarily have relationship to their prices

  3. value has no relationship to utility schedules

  4. free goods are goods that are essential to life.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The paradox of value, also known as the diamond water paradox, is a contradiction which means that the total utilities yielded by commodities do not necessarily have relationship to their prices. We see that though water is available in abundance and it so useful and essential for survival yet it costs much lower than diamond which is just a luxury item costs much higher price in the market. This paradox discusses the concepts of value in use and value in exchange. The things which have the greatest value in use have little or no value in exchange; whereas those which have the greatest value in exchange have frequently little or no value in use.

Multiple choice social science prices and cost of living value and price utility, value and price price rise/inflation

When a relationship between DMU of a product and its prices is decided than it helps in determining __________.

  1. total marginal value of a product

  2. average utility of product

  3. price of product in market

  4. total utility value of product
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When the diminishing marginal utility is set in the market then that is compared with various prices in the market for the commodity which decides the ideal price for the commodity in the market which the consumer is willing to pay if they get required utility from the product.