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 business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Consumer equilibrium can be determined only if the law of diminishing marginal utility holds good.

  1. True

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

Consumer equilibrium will be achieved only when MU diminishes as more units of a commodity are consumed. In case MU tends to rise, consumption of a commodity will never reach to an end. Thus, determination of equilibrium will never be possible.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

The law of equi- marginal utility explains equilibrium of the _______.

  1. consumer

  2. producer

  3. economy

  4. state
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • The law of equi-marginal utility is an extension of law of DMU. It states that with the limited that a person has, he aims to spend it on different commodities and earn maximum and equal satisfaction from them. 
  • He should such a combination of goods so that the utility derived from the last unit of the goods are the same. 
  • Thus, it aims to establish equilibrium at that point where the consumers gets maximum satisfaction by consuming a particular combination of goods. 
Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

_______ states that consumer distributes his expenditure between different goods in such a way that the marginal utility derived from the last rupee spent on each good is the same.

  1. The law of demand

  2. The law of diminishing marginal rate of substitution

  3. The law of diminishing marginal utility

  4. The law of equi-marginal utility
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The law of equi-marginal utility is based on the law of diminishing marginal utility. The equi-marginal principle states that a consumer will be maximizing his total utility when he allocates his fixed money income in such a way that the utility derived from the last unit of money spent on each good is equal.

 A rational consumer substitutes some units of the commodity of greater utility to some units of the commodity of less utility. The result of this substitution will be that the marginal utility of the former (commodity with greater utility) will fall and that of the latter will rise, till the two marginal utilities are equalized.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Consumer is said to be in equilibrium, maximizing his total utility, when

  1. the marginal utilities of the two goods consumed are equal.

  2. the proportions of the marginal utilities and respective prices are equal.

  3. the consumer gets full satisfaction from the consumption.

  4. the consumer feels satisfied with his expenditure on the various goods.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the law of equi-marginal utility, a consumer is said to be in equilibrium when the ratio of the marginal utilities of the two commodities and their respective prices are equal. This means that the MU of the last rupee spent on each commodity is the same.

The equation it should satisfy is: MUX /PX = MUY/PY

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Which of the following can be treated as limitation of the law of equi-marginal utility?

  1. Assumption of rationality is not practicable.

  2. Consumers ignorance is a potent factor that always results in other than equilibrium position.

  3. The assumption that the goods on which the consumer spends his money are perfectly divisible, i.e., goods can be bought even in extremely small quantities does not hold true at times.

  4. All of above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In real life, consumers do not act rationally while measuring the utility of the product which they are purchasing. Consumers ignore to compare the price and utility of different commodities, due to which they cannot make a rational decision. Moreover, the law of equi-marginal utility does not hold good in case of indivisible goods because comparison is not possible.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

___________ law is unrealistic in nature.

  1. Law of DMU

  2. Law of equi-marginal utility

  3. Both a & b

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

In real life situation, Law of equal marginal utility is very unrealistic because it is very irrational on the part of the consumer to measure his satisfaction in cardinal number to find the utility he is deriving from a product and then comparing it to the price of the product.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

As per the law of equal marginal utility consumer considers __________.

  1. prices

  2. marginal utilities

  3. availability of goods

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In equal marginal utility case the consumer tries to match the utility which he is getting from a standard unit of a commodity with the price that is prevalent in the market with other factors remaining constant to achieve equilibrium.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

When price of both the commodities is same, the consumer attains maximum satisfaction where ________.

  1. $\displaystyle \frac{MU _X}{MU _Y} > \frac{P _X}{P _Y}$
  2. $\displaystyle \frac{MU _X}{P _X} < \frac{MU _Y}{P _Y}$
  3. $\displaystyle \frac{MU _X}{P _X} > \frac{MU _Y}{P _Y}$
  4. $MU _X = MU _Y$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When consumer consumes two commodities and their prices are the same, then equilibrium is achieved when consumer equates marginal utility derived from one commodity with the marginal utility derived from another commodity. 

Multiple choice business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

At the point of equilibrium of firm (under perfect competition) _____________.

  1. MC curve must be rising

  2. MC curve must be falling

  3. MR cure must be rising

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

A firm is said to be in equilibrium when it maximizes its profit. It is the point when it has no tendency either to increase or contract its output. ... So in order to be in equilibrium, the firm will attempt to maximize the difference between total revenue and total costs.When MC is falling, the cost of producing an additional unit of output tends to decrease. Under perfect competition, when price is constant, the difference between the total revenue and total variable cost tends to increase.

Multiple choice elements of business selling and distribution definition and functions of purchasing and storage department purchasing and stores product life cycle

Locating sources of supply is also called as ______.

  1. Product planning

  2. Contractual function of buying

  3. Contractual function of selling

  4. Elasticity of supply
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Locating and identifying potential sources of supply is a key preliminary step in procurement and is formally recognized as a contractual function of buying.

Multiple choice geography food security in india components of food security government measures for food security important index numbers

Under PDS, a price lower than the market price is called _____.

  1. Fair price

  2. Minimum price

  3. Issue price

  4. Product price
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A price lower than the market price is called issue price. The price at which a new security will be distributed to the public prior to the new issue trading on the secondary market. Also commonly referred to as offering price.

Multiple choice commercial applications marketing mix - 4 p's meaning and objectives of pricing pricing strategies pricing

Consider the following

    1. Changes in quality
    2. Changes in compositions
    3. Tastes and preferences
    4. Price differences
    Which of the above impose limitations in the use of price indices to measure the terms o

    1. 1 and 2

    2. 2 and 3

    3. 1, 2 and 3

    4. 1, 2 and 4
    Reveal answer Fill a bubble to check yourself
    D Correct answer
    Explanation

    Price indices are limited by changes in product quality, composition, and price differences across regions or time. Tastes and preferences are subjective and generally do not directly invalidate the calculation of a price index.

    Multiple choice commercial applications marketing mix - 4 p's meaning and objectives of pricing pricing strategies pricing

    Administered pricing applies to the practice of pricing on the basis of.

    1. Cost

    2. Competitive pressure

    3. The law of supply and demand

    4. The policy decisions of the sellers
    Reveal answer Fill a bubble to check yourself
    D Correct answer
    Explanation

    Administered pricing occurs when prices are set by the seller or a regulatory authority rather than being determined solely by the forces of supply and demand in a competitive market.

    Multiple choice commercial applications marketing mix - 4 p's meaning and objectives of pricing pricing strategies pricing

    In which method of pricing does a manufacturer sell the same product at two or more different prices?

    1. Administered pricing

    2. Dual pricing

    3. Monopoly pricing

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

    Dual pricing involves selling the same product at different prices to different customers or in different markets. This is a form of price discrimination.