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

A shift in the budget line, when prices are constant, is due to:

  1. change in demand

  2. change in income

  3. change in preferences

  4. change in utility
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A budget line represents all combinations of goods a consumer can afford given their income and prices. If prices remain constant, a change in the consumer's income shifts the budget line outward (if income increases) or inward (if income decreases).

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

When price of Good-Y (shown on Y-axis) rises:

  1. price line shifts to the right

  2. price line shifts to the left

  3. price line rotates to the right

  4. price line rotates to the left
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the price of Good-Y rises, the consumer can afford less of it, causing the Y-intercept of the budget line to move closer to the origin. This results in the budget line rotating inward toward the origin, which is described as rotating to the left.

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

Any point above the consumer's equilibrium point is desirable but is not attainable because ________.

  1. income and prices are given

  2. taste and income and given

  3. preference and prices are given

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

Points outside the budget line are unattainable because they exceed the consumer's total budget. The budget is defined by the consumer's income and the market prices of the goods.

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

In indifference curve theory, price effect is split into which two effects?

  1. Price effect and output effect

  2. Price effect and substitution effect

  3. Price effect and income effect

  4. Substitution effect and income effect
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The price effect describes the total change in consumption due to a price change. It is decomposed into the substitution effect (change due to relative price changes) and the income effect (change due to change in real purchasing power).

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems

How many indifference curves can touch the price line?

  1. Two

  2. One

  3. As many as possible

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

The consumer achieves equilibrium at a point which is in the highest possible indifference curve and which fits the budget of the consumer given the prices of both the commodities. Such a point is only possible when the budget line is tangent to the indifference curve. Therefore, only one indifference curve can touch the budget line. 

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
Marginal opportunity cost falls as resources are shifted from Good - $1$ to Good - $2$.

  1. True

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

The slope of production possibility curve is the marginal opportunity cost, which refers to the additional sacrifice that an economy needs to make when it shifts resources and technology from production of one commodity to the other. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost.  

Multiple choice economics economic reconstruction economics of planning objectives of economic planning in india major economic problems
PPC shows an increasing slope.

  1. True

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

The slope of production possibility curve shows the marginal opportunity cost which refers to the additional sacrifice that an economy must make when they shift resources and technology from production of one commodity to the other. Since resources are use specific, therefore, each time when one more unit of a commodity is produced a larger quantity of the other commodity is required to be sacrificed. This results in increasing marginal opportunity cost., which is denoted by the slope of the PPC.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

In order for a firm to successfully carry out price discrimination which of the following conditions must hold?
I. The fine should not face a downward sloping demand curve
II. The firm must have a market power
III. Buyers with differing demand must be separable.
IV. The firm must have motives beyond profit maximization.
V. The firm must able to prevent the re-sale of its product.

  1. I, III & V only

  2. III & IV only

  3. l & IV only

  4. II, III & V only
Reveal answer Fill a bubble to check yourself
A Correct answer
Multiple choice economics ancient indian economic concepts goods, wealth and welfare major definitions of economics wealth, capital and money

Goods which exhibit negative income-demand relationship are called ________.

  1. Giffen goods

  2. inferior goods

  3. normal goods

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

Inferior goods refer to those goods which possess an inverse relation between income of a consumer and demand of that particular good,that is, when there is a rise in income of the consumer,the demand of that particular good falls.For example,coarse grains..

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

________ study the changes in the volume of goods.

  1. Value Index Numbers

  2. Quantity Index Numbers

  3. Price Index Number

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

When any goods change in proportion between two different periods of time, then it is measured with the help of Quantity Index Numbers. In other words, we can say the study of measuring any proportionate change of goods in two different periods of time is called quantity index numbers.

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

An increase in the supply of a good is caused by.

  1. Improvements in its technology

  2. Fall in the prices of other goods

  3. Fall in the prices of factors of production

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

An increase in supply occurs when production becomes more efficient or cheaper, which can be caused by technological improvements, lower input costs, or favorable conditions for other goods.

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.