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

Market demand curve shows the ______.

  1. quantities that consumers as a whole are willing to purchase at different prices.

  2. demand for a commodity in an area

  3. demand of the market in different conditions

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

The market demand curve is the addition of all the individual demand curves in the market. It shows the quantity demanded by the individuals at a given price point. Hence, the market demand curve shows the quantities that consumers as a whole are willing to purchase at different prices.

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

When the demand curve of a pure monopoly firm is elastic, marginal revenue will be _________.

  1. negative

  2. positive

  3. zero

  4. any of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When demand is elastic (e > 1), an increase in quantity (via a price decrease) leads to an increase in total revenue, meaning marginal revenue must be positive.

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

For a monopoly firm the marginal revenue curve _________.

  1. overlaps AR curve

  2. is above the AR curve

  3. lies half way between AR curve and the Y axis

  4. is parallel to X axis
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For a linear demand curve, the marginal revenue curve is twice as steep as the demand (AR) curve, meaning it bisects the distance between the Y-axis and the AR curve at any given price level.

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

The marginal revenue curve of first degree price discriminating monopoly is __________.

  1. U shaped

  2. straight line

  3. same as its supply curve

  4. equal to its demand curve
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In first-degree price discrimination, the monopolist charges each consumer their maximum willingness to pay. Thus, the marginal revenue of each unit is equal to the price of that unit, making the MR curve identical to the demand curve.

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

Marginal revenue of a pure monopoly is less than its price because _________.

  1. to sell more it reduces prices

  2. fear of government intervention

  3. fear of losing customer base

  4. its commitment toward social justice
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A monopolist faces a downward-sloping demand curve. To sell an additional unit, the firm must lower the price not just for that unit, but for all previous units, causing MR to be less than the price.

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

Which of the following faces a downward sloping demand curve?

  1. Firm in a competitive market

  2. Firm in a monopoly market

  3. Both (A) and (B)

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

A firm in a competitive market faces a horizontal demand curve (price taker). A monopoly firm faces the entire market demand curve, which is downward sloping.

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

Which of the following statement is correct.

  1. in case of a Monopolistic firm there is no supply curve

  2. supply curve of a Monopolistic firm is downward sloping

  3. supply curve of a monopolistic firm is upward sloping

  4. supply curve of a monopolistic firm is a straight line
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A monopoly does not have a supply curve because it is a price setter. The quantity supplied depends on the demand curve and the marginal cost curve, not just price.

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

A natural monopoly has declining _________ over large range of output.

  1. long run average cost

  2. short run average cost

  3. long run total cost

  4. short run total cost
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Natural monopoly is a situation which exist due to the high fixed or start up costs to set up a business. It is seen basically where there are unique technology, raw materials.etc. A monopoly based on size and market strength is known as natural monopoly. It also has a long run average cost which is declining over large range of output.

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

For a monopoly firm the MR curve ___________.

  1. overlaps AR curve

  2. is above the AR curve

  3. lies half way between AR Curve and the Y-axis

  4. is parallel to X-axis
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is a duplicate of question 473117 testing the same concept. For linear demand, MR lies halfway between AR and Y-axis because MR has twice the slope of demand. Both start at same intercept, but MR hits zero at half the quantity where AR reaches zero.