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 economics income-output determination public debt public debt main feature of tax

In case of excess demand, equilibrium price must rise.

  1. True

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

True.
Excess demand generates pressure of demand on the existing supply. As an immediate impact, market price rises. It leads to extension of supply and contraction of demand. Finally, equilibrium is reached in the market where DX=SXDX=SX. This new equilibrium price happens to be higher than the initial equilibrium price.

Multiple choice economics income-output determination public debt main feature of tax

Equilibrium price may not change even when market demand happens to change.

  1. True

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

True.
Equilibrium price may not change with a change in market demand, if the market supply changes in a proportion equal to the change in market demand.

Multiple choice economics income-output determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

_____ refers to that period in which supply of a commodity cannot be increased beyond its existing stock even if the demand has increased.

  1. Very short period

  2. Short period

  3. Long period

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

In the very short period, supply is perfectly inelastic because the time frame is too brief to adjust production levels or bring in new resources, meaning supply is limited to existing stock.

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Equilibrium price and quantity is determined by ___________.

  1. Mid-point of demand curve

  2. Central planning agency

  3. Intersection of demand and supply curve

  4. Mutual discussion of trade and consumer associations
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a competitive market, the equilibrium price and quantity are established where the quantity demanded by consumers equals the quantity supplied by producers, which is the intersection point of the demand and supply curves.

Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Sweezy's model does not explain ______________.

  1. price rigidity

  2. price determination

  3. output determination

  4. kinked demand determination
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Sweezy's kinked demand curve model advocates the behavior of oligopolistic organizations when the price and output are determined. Therefore, Instead of laying emphasis on price-output determination, the model explains the behavior of oligopolistic organizations when price and output is determined. 

Multiple choice business economics and quantitative methods correlation analysis aspects of correlation scatter graphs and correlation linear regression

Example of negative correlation is________________.

  1. relationship between price and supply of a commodity

  2. relationship between price and demand for a commodity

  3. relationship between income and saving

  4. relationship between income and consumption
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Relationship between price and commodity is an example of negative correlation as increase in the price of a commodity leads to a decrease in the quantity of a commodity i.e. both the variables move in an opposite direction.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Which of the following is true for a company which continuous reviews its inventory system?

  1. Order Interval is fixed

  2. Order Interval varies

  3. Order Quantity is fixed

  4. Both A and C
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Continuous inventory system or perpetual inventory system of inventory describes the system of inventory where information of inventory quantity with the availability is monitored on a regular basis.

As inventory ordering is also based on the availability of stock, order intervals may change because of the perpetual inventory system.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Which of the following is NOT the feature of monopoly form of market?

  1. Not elastic in nature

  2. Legal barriers

  3. Size of the market is too small

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

A monopoly is characterized by a single seller and high barriers to entry. 'Not elastic in nature' is not a standard feature, as the demand curve for a monopolist can be elastic or inelastic depending on the price point.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

When elasticity of demand is equal to one, MR will be equal to _______.

  1. one

  2. zero

  3. infinity

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

When the price elasticity of demand is 1 (unitary elastic), the total revenue is maximized, which means the marginal revenue (the change in revenue from selling one more unit) is zero.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Marginal Revenue will be negative if the demand is _________.

  1. relatively elastic

  2. unitary elastic

  3. relatively inelastic

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

Marginal revenue is negative when the demand is relatively inelastic (elasticity < 1), because to sell more units, the price must be lowered so significantly that total revenue decreases.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Marginal revenue will be positive if elasticity of demand is _________.

  1. less than one

  2. more than one

  3. equal to one

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

Marginal revenue is positive when demand is relatively elastic (elasticity > 1), as lowering the price leads to a proportionately larger increase in quantity sold, increasing total revenue.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

If a demand curve exhibits unit elasticity for all prices the MR curve ___________.

  1. is identical with it

  2. lies below the demand curve

  3. is parallel to the x-axis

  4. is identical with the y-axis
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If the demand curve has unit elasticity at all points (a rectangular hyperbola), the total revenue is constant. Therefore, the marginal revenue is zero, meaning the MR curve lies on the x-axis (parallel to the x-axis).

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Imperfect monopoly is a single firm industry where ___________________.

  1. The cross elasticity in the market is zero

  2. The cross elasticity of demand between the product of the firm and that of other commodities in the market is small, though it is above zero

  3. The price elasticity to the market is zero

  4. The income elasticity to the market is zero
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In economic theory, imperfect competition is a type of market structure showing some but not all features of competitive markets. Forms of imperfect competition include: Monopolistic competition: A situation in which many firms with slightly different products compete. The cross elasticity of demand between the product of the firm and that of other commodities in the market is small, though it is above zero

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Price discrimination is not profitable when _________________.

  1. The demand curves are iso-elastic

  2. The demand curves are elastic

  3. The supply curves are iso-elastic

  4. The supply curves are elastic
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Price discrimination is not profitable if the demand curves of different market segments have the same elasticity (iso-elastic), as there is no basis to charge different prices to maximize revenue.