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

Market equilibrium of a commodity is determined by ________.

  1. balancing of demand and supply position

  2. aggregate demand

  3. aggregate supply

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

Market equilibrium is a situation where the aggregate demand and supply of a commodity are the same. Equilibrium is achieved at the intersection of aggregate demand aggregate supply and at that level we get the equilibrium price and quantity. 

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

When demand increases, the demand curve shifts to the left. 

  1. True

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

Demand increases when price remains constant and other factors change.
For example if the income of the consumer increases, his demand will increase as a result the demand curve shifts to the right.
When demand for a good decreases say with the fall in income, the demand curve will shift to the left.

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

Determinants of aggregate demand is symbolically expressed as _______________.

  1. $AD = C+I$
  2. $AD = C+I+G+(X-M)$
  3. $AD = C+I+(X-M)$

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

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.

The determinants of aggregate demand is expressed as: 

Aggregate demand= C+I+G+ (X-M) where

C= Consumption expenditure

I= Investment expenditure

G= Government expenditure

(X-M)= Net export.

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

Graphically, when demand curve moves upward, there is __________.

  1. more demand

  2. more supply

  3. equilibrium

  4. none of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time.

When the demand curve moves upward this shows that the price of good increases and the demand for goods falls this will show the upward movement in the demand curve

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

In economics, equilibrium is a situation in which __________.

  1. there is no inherent tendency to change

  2. quantity demanded equals quantity supplied

  3. the market clears and becomes stable

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

Equilibrium state is a state at which the quantity supplied is equal to the quantity demanded. Hence, neither buyers nor sellers want to change their behaviour. They are exact same. Hence, in economics, equilibrium is a situation in which there is no inherent tendency to change. Also, the market clears and becomes stable.

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

In economics, equilibrium is a situation in which _________.

  1. the market becomes unstable

  2. there is no inherent tendency to change

  3. quantity demanded is more than quantity supplied

  4. when firm start to make profit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Equilibrium state is a state at which the quantity supplied is equal to the quantity demanded. Hence, neither buyers nor sellers want to change their behaviour. They are exact same. Hence, in economics, equilibrium is a situation in which there is no inherent tendency to change.

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

The period of time, when supply is fully adjusted to change in demand is called_________.

  1. short period.

  2. very short period.

  3. mid period.

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

The period of time, when supply is fully adjusted to change in demand is called long term period. During the long period, all factors of production of inputs in the industry can be converted into variable. In the long run the firms can change the scale of production, the plant size can be changed, etc. Thus, in long run supply can be fully adjusted to the change in demand. 

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

Since under monopolistic competition, P>MC in equilibrium, there is _________.

  1. optimal allocation of resources

  2. nonoptimal allocation of resources

  3. greater allocation of resources

  4. lesser allocation of resources
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under monopolistic competition, if Price is more than Marginal cost there is no optimal utilisation of resources. Optimum utilisation of resources will be achieved only when price = marginal cost. 

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

Which of the following statements is correct, in the case of excess demand?

  1. Market supply will be less than market demand

  2. Equilibrium price and equilibrium quantity will increase.

  3. Both (a) and (b).

  4. Neither (a) nor (b).
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In case of excess demand market supply will be less than market demand and equilibrium price and quantity will decrease. Its a situation in market when at the given price the quantity demanded id more than quantity supplied. Due to competition the prices will rise and then buyers will demanding less of the commodity. When the price is high suppliers increase the supply thereby increasing the supply as well as price of the commodity. 

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

At $ P _X  $ = Rs.  5, demand for Good-X is $30$ units and supply of Good-X is $20$ units, it is a situation of:

  1. excess demand.

  2. excess supply.

  3. equilibrium.

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

Excess demand is a situation where the demand for a product is more than the supply for the product. In the given question, demand for good X is 30 units and supply for good X is 20 units. Hence, the excess demand is 10 units. 

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

What would price ceiling lead to when the maximum price is fixed lower than the equilibrium price?

  1. Excess demand.

  2. Excess supply.

  3. Deficient demand.

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

Price ceiling means that a maximum price that can be charged for a product is fixed by the government. The sellers cannot charge a price beyond it. Price ceiling is done to help the people to get goods at a lower rate and save them from getting exploited. Hence, when the prices are reduced the demand for that commodity increases due to the mechanism of law of demand, while supply decreases, leading to excess demand.

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 theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

 In determination of Equilibrium Level of Income by AD-AS approach, AD curve is represented by ____________.

  1. (C + S) curve

  2. (C + I) curve

  3. (S + I) curve

  4. (C +Y) curve
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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.

The Ad curve in income determination analysis represents a two sector economy which only includes the expenditure made by the consumer sector and the producer sector.

Therefore, aggregate demand = consumption + investment = C + I.

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

When aggregate supply exceeds aggregate demand or when investment is less than savings, _____________ will decrease.

  1. savings

  2. price

  3. income

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When aggregate supply is more than aggregate demand or when investment is less than savings, then the planned inventory rises above the desired level. To clear the unwanted increase in inventory, firms plan to reduce the production output till Aggregate demand becomes equal to Aggregate supply. Therefore, level of national income reduces to the level of aggregate demand in the economy.