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 organisation of commerce and management marketing mix branding and packaging marketing marketing management

Which of the following factor affects the price determination?

  1. Demand

  2. Product cost

  3. Government and legal regulations

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

7 important factors that determine the fixation of price are:

(i) Cost of Production
(ii) Demand for Product
(iii) Price of Competing Firms
(iv) Purchasing Power of Customers
(v) Government Regulation
(vi) Objective
(vii) Marketing Method Used

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

If factor inputs are complementary to each other the marginal rate of technical substitution will be ______.

  1. constant

  2. zero

  3. increasing

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

If inputs are perfect complements (Leontief production function), they must be used in a fixed ratio. Therefore, the marginal rate of technical substitution (MRTS) is zero because you cannot substitute one for the other without changing the output.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Equilibrium price is determined at the interaction point of demand curve and supply curve.

  1. True

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

Market equilibrium occurs at the price level where the quantity demanded by consumers equals the quantity supplied by producers, which is the intersection of the two curves.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The law of demand states ______ relation between demand and price.

  1. a direct

  2. an inverse

  3. no

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

The law of demand states that, ceteris paribus, as the price of a good increases, the quantity demanded decreases, and vice versa, representing an inverse relationship.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

When price of commodity rise,the demand for it _____ .

  1. rises

  2. falls

  3. remain

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

According to the law of demand, there is an inverse relationship between price and quantity demanded; therefore, if the price rises, the quantity demanded falls.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The market for hand tools (Such as hammers and screwdrivers) is dominated by Draper, Stanley, and Craftsman. This market is best described as

  1. Monopolistically competitive

  2. a monopoly

  3. an oligopoly

  4. perfectly competitive
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

An oligopoly is a market structure dominated by a small number of large firms. Since the hand tool market is dominated by only three major companies, it fits this definition.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Consumer stops purchasing the additional units of the commodity when ______________________.

  1. marginal utility starts declining

  2. marginal utility become zero

  3. marginal utility is equal to marginal utility of money

  4. total utility is increasing
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the law of diminishing marginal utility, a rational consumer will stop consuming additional units when the marginal utility of the last unit consumed becomes zero, as consuming more would then decrease total utility.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Marginal utility of a commodity dependson its quantity and is_______.

  1. inversely proportional to its quantity

  2. not proportional to its quantity

  3. independent of its quantity

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

The law of diminishing marginal utility states that as more units of a commodity are consumed, the additional satisfaction (marginal utility) derived from each subsequent unit decreases, meaning it is inversely related to the quantity consumed.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The point of intersection between aggregate demand curve and aggregate supply curve is called _________________.

  1. aggregate demand

  2. market demand

  3. effective demand

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

Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. 

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.

Therefore, the point of  intersection between aggregate demand curve and aggregate supply curve is called effective demand as at this point all the output produced in the economy is used by the consumers of the economy owing to full employment. 

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Marginal Productivity Theory is based on the assumption of ___________________.

  1. perfect competition

  2. monopoly

  3. oligopoly

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

The Marginal Productivity Theory of distribution assumes perfect competition in both the product and factor markets to determine the prices of factors of production.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Effective demand depends on ______.

  1. capital-output ratio

  2. output-capital ratio

  3. total expenditure

  4. supply price
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Effective demand depends on supply price. Effective demand refers to that point where aggrgate demand is equal to aggregate supply. Therefore, supply price and demand price are independent.