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 functions of money value, nature and functions of money liquidity preference and profit

Which of the following is not a characteristic of a price taker?

  1. TR=P x Q

  2. AR=Price

  3. Negatively - sloped demand curve

  4. Marginal Revenue = Price
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Price taker firm exist in ease of perfect competition where the demand curve is a straight line parallel to the x-axis as the firm can sell any amount of the commodity at the same price. So demand curve will not be negatively sloped.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

As per Irving Fisher principle, if the quantity of money is reduced by one half  ________.

  1. the price level will also be reduced by one half

  2. value of money will be twice

  3. the price level will be double and the value of money will be one half

  4. the price level will also be reduced by one half and value of money will be double.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the Fisher equation of exchange (MV=PT), if velocity (V) and transactions (T) are constant, the price level (P) is directly proportional to the money supply (M). If M is halved, P is halved, and since the value of money is the reciprocal of the price level (1/P), it doubles.

Multiple choice organisation of commerce and management economics of development and planning fundamental of economic development economics of development economic mechanism

The consumer is in equilibrium at a point where the budget line.

  1. Is above an indifference curve

  2. Is below an indifference curve

  3. Is tangent to an indifference curve

  4. Cuts an indifference curve
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The consumer is in equilibrium at a point where the budget line is tangent to an indifference curve, because it can not intersect the IC either from above or below.

Multiple choice organisation of commerce and management economics of development and planning fundamental of economic development economics of development economic mechanism

An indifference curve slopes down towards right since more of one commodity and less of another result in.

  1. Same satisfaction

  2. Greater satisfaction

  3. Maximum satisfaction

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

An indifference curve slopes down towards right since more of one commodity and less of another result same satisfaction to the consumer.

Multiple choice organisation of commerce and management economics of development and planning fundamental of economic development economics of development economic mechanism

If all inputs are trebled and the resultant output is doubled, this is a case of____________.

  1. Constant returns to scale

  2. Increasing returns to scale

  3. Diminishing returns to scale

  4. Negative returns to scale
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
If all inputs are trebled and the resultant output is doubled, this is a case of diminishing returns to scale.
Diminishing return to scale can be defined as a situation when there is an increase in input causes a less proportional increase in output than the input. It is a type of effect which can be seen in the short run period when we increase inputs.
Multiple choice organisation of commerce and management economics of development and planning fundamental of economic development economics of development economic mechanism

A decrease in the demand for cameras keeping other things the same results in ________.

  1. Increase the number of cameras bought

  2. Decrease the price but increase the number of cameras bought

  3. Increase the price of cameras

  4. Decrease the price and also the number of cameras bought
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Decrease in demand will decrease the price and quantity both.

Multiple choice organisation of commerce and management economics of development and planning fundamental of economic development economics of development economic mechanism

Comforts lies between the.

  1. Inferior goods and necessaries

  2. Luxuries and inferior goods

  3. Necessaries and luxuries

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

Comforts lies between necessaries and luxuries because comforts refer to those goods which are not required for a happy living.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Indifference curves can intersect each other.

  1. True

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

Indifference curves cannot intersect each other as it would break down the indifference curve analysis. This is because the consumer would have more than one point on the indifference curve giving him a different level of satisfaction.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

What shows all possible combinations of two goods that can be bought by the consumer?

  1. Marginal utility curve

  2. Indifference curve

  3. Budget line

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

The budget line shows all possible combinations of two goods that a consumer can afford given their income and the prices of the goods.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

At the point of consumer's equilibrium indifference curve and budget curve are __________.

  1. passing through each other

  2. intersecting

  3. tangent

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

Consumer equilibrium occurs where the indifference curve is tangent to the budget line, representing the highest utility achievable within the budget constraint.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

What is required to derive the slope of the budget line?

  1. Amount of price change in good 1 and good 2

  2. Amount of quantity changed in good 1 and good 2

  3. Amount of income change

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

The slope of the budget line is the is the ratio of the prices of good 1 and good 2.  Hence, the other 3 options are invalid as slope of budget line is only related to the prices of the two goods with a fixed income.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

What happens to the budget line when consumer income increases but the price of goods remains unchanged?

  1. Parallel upwards shift

  2. Parallel downwards shift

  3. Shift only on the x axis

  4. Shift only on the y-axis
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Greater the income with same prices would mean that the consumer can purchase more of both the goods on the budget line.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Price line indicates __________.

  1. all possible combination for the consumer to buy with given income and prices of the two commodities

  2. all possible combination for the consumer to buy with given income and prices of the single commodity

  3. income of the consumer

  4. prices of related commodities
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

All points on the budget lines are points of optimal efficiency. Wherein the consumer is maximizing his utility by utilizing his entire income.  Points above the budget line are not attainable as it requires greater income.