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 ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

The quantity supplied of a good or service is the amount that.

  1. In actually bought a given time period at a given price

  2. Producers wish they could sell at a higher price

  3. Producers plan to sell during a given time period at a given price

  4. People are willing to buy during a given time period at a given price
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Quantity supplied refers to the amount of a good that producers are willing and able to offer for sale at a specific price during a specific period.

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

In case of low-level commodities, income effect is _____.

  1. Zero

  2. Negative

  3. Infinite

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

An income effect is positive in case of normal goods. There is direct relationship between income and quantity demanded. Income effect is negative in case of inferior goods (including Giffen goods) where we find inverse relationship between income and quantity demanded.

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

An inferior commodity is one which is consumed in smaller quantities when the income of consumer ________.

  1. becomes nil

  2. remains the same

  3. falls

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

The price of inferior goods are very cheap and usually associated with low levels of income. So when the consumer's income rises they try to consume normal good and when there income decreases they consume inferior goods. 

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

The supply of a good refers to the _________.

  1. Actual production of the good

  2. Total existing stock of the good

  3. Stock available for sale

  4. Amount of the good offered for sale at a particular price per unit of time
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The supply of a good refers to the amount of the good offered for sale at a particular price per unit(period) of time.

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

As per the concept of increasing marginal opportunity cost, under the PPF theory, it can be interpreted that to produce more units of good X, ____________ of good Y have to be sacrificed.

  1. increasing units

  2. constant units

  3. decreasing units

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

The slope of the curve i.e. marginal opportunity cost which states that for production of every successive unit of butter we need to sacrifice more and more of guns because resource are use specific. 

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money
How are the two goods (apples and oranges) related when, as a result of rise in the price of apples, demand for oranges increases?

  1. Substitute Goods

  2. Complementary Goods

  3. Normal Goods

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

A substitute good is a good that can be used in place of another. It is a good with a positive cross elasticity of demand.

This means a good's demand is increased when the price of another good is increased; both in the same direction.

For example, if apples and oranges are substitutes for a consumer, then if the price of apples increases, the consumer will buy less of apples and more of oranges. Thus, when price of apples increases, the demand for oranges will rise. 

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money
Inferior goods are those whose income effect is __________.

  1. negative

  2. positive

  3. zero

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

An inferior good is a good whose demand decreases when consumer income rises. 

A normal good's demand increases when the income rises, thus its income effect is positive.

Hence, the income effect for inferior good is negative.

For example as a consumer's income increases, his/her demand of the cheap cars will decrease, while demand for costly cars will increase. Here the cheap car is an inferior good for that consumer.

Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

If with the rise in price of good $Y$, demand for good $X$ rise, the two goods are: (Choose the coorect alternative)

  1. Substitutes

  2. Complements

  3. Not related

  4. Jointly demanded
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
If with the rise in price of good $Y$, demand for good $X$ rises, the two goods are said to be substitutes. This is because substitute goods are the ones which are consumed in place of each other. For instance, tea and coffee. Thus, if the price of one good rises, the demand for other substitute good will rise. 
Hence, the correct answer is option (a). 
Multiple choice economics how does production take place? natural resources- air, water and land land land,labour, capital and entrepreneur production mechanism

The supply curve of land is __________.

  1. U shaped

  2. L shaped

  3. a straight line

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

In classical economics, the total supply of land is considered fixed, meaning it does not change regardless of price. This results in a perfectly inelastic supply curve, which is represented as a vertical straight line.

Multiple choice economics theory of supply elasticity of supply supply - law of supply and price elasticity of supply law of supply and elasticity of supply

The supply is __________, when a greater change in price leads to smaller change in quantity supplied.

  1. relatively more elastic

  2. perfectly elastic

  3. perfectly inelastic

  4. relatively inelastic
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a large change in price results in a very small change in the quantity supplied, the supply is considered relatively inelastic (price elasticity of supply < 1).

Multiple choice economics theory of supply elasticity of supply supply - law of supply and price elasticity of supply law of supply and elasticity of supply

The percentage change in quantity supplied due to percentage change in price is called __________.

  1. elasticity of supply

  2. law of supply

  3. supply curve

  4. elasticity of demand
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It is defined as the percentage change in quantity supplied divided by the percentage change in price.

Multiple choice economics theory of supply elasticity of supply supply - law of supply and price elasticity of supply law of supply and elasticity of supply
Supply is more elastic in case of ______________.

  1. very short period

  2. short period

  3. long period

  4. both (b) and (c)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the long run, producers have more time to adjust their production processes, acquire new resources, or enter/exit the market, making supply more elastic. In the short run, production capacity is often fixed.

Multiple choice economics theory of supply elasticity of supply supply - law of supply and price elasticity of supply law of supply and elasticity of supply
When 15% increase in price of the commodity causes 10% increase in the quantity supplied, then elasticity of supply is _____________.

  1. elastic

  2. inelastic

  3. perfectly elastic

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

Elasticity of supply = (% change in quantity supplied) / (% change in price). Here, 10% / 15% = 0.67. Since the value is less than 1, the supply is considered inelastic.

Multiple choice economics theory of supply elasticity of supply supply - law of supply and price elasticity of supply law of supply and elasticity of supply

Write True or False with a reason.
Price elasticity of supply measures the change in quantity supplied in response to a change in own price of the commodity.

  1. True

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

True. Price elasticity of supply$=\cfrac { Percentage\quad change\quad in\quad quantity\quad supplied }{ Percentage\quad change\quad in\quad price } $