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 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.
${E} _{s}=1$ only if supply curve forms a $\angle {45}^{o}$ at the origin. Is it true?

  1. True

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

While a 45-degree line through the origin has an elasticity of 1, it is not the only case. Any straight-line supply curve passing through the origin has an elasticity of 1, regardless of the specific angle, as long as it is linear and originates from (0,0).

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

In a situation of perfectly elastic supply, price of the commodity tends to remain constant, no matter demand increases or decreases.

  1. True

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

True.
The price will remain unchanged under a perfectly elastic supply curve, no matter demand increases or decreases. This is because supply responds proportionately to the increase or decrease in demand, i.e., it only changes on the quantity axis, while, it is static on the price axis at a given 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

The responsiveness of the sellers to a particular change in the price of the commodity is termed as ___________. 

  1. elasticity of supply

  2. theory of demand

  3. theory of supply

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

Elasticity of supply measures the degree of responsiveness of the quantity supplied of a commodity to a change in its 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

The concept of elasticity of supply is a parallel concept to the concept of __________.

  1. theory of demand

  2. theory of supply

  3. elasticity of demand

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

Elasticity of supply is the counterpart to the elasticity of demand, as both measure the responsiveness of quantity to price changes for their respective curves.

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 elasticity of supply is _________ when the change in the amount of supply is in exact proportion to the change in price.

  1. perfectly elastic

  2. perfectly inelastic

  3. unitary

  4. less elastic
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Unitary elasticity occurs when the percentage change in quantity supplied is exactly equal to 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

A 6% decrease in price has caused 9% decrease in quantity supplied, the price elasticity of supply will be _________.

  1. 1.33

  2. -1.33

  3. 1.5

  4. -0.66
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Elasticity of supply is the ratio of percentage change in quantity to percentage change in price. Es = 9 / 6 = 1.5. The negative signs cancel out because elasticity of supply is generally positive.

Multiple choice history economic system and economic policies american dominance, neo-imperialism and new economic policy insights on lpg changing economic policies

Which of the following most closely approximates our definition of oligopoly?

  1. The cigarette industry

  2. The barber shops

  3. The gasoline stations

  4. Wheat farmers
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Business that are part of an oligopoly, share some common characteristics: they are less concentrated than in a monopoly, but more concentrated than in a competitive system. This creates a high amount of interdependence which encourages competition in non-price-related areas, like advertising and packaging. The tobacco companies, soft drink companies, and airlines are examples of an imperfect oligopoly.

Multiple choice business organisation and correspondence meaning and factors of business environment dimensions of business environment business environment and its dimensions business environment

As per Porter's Forces Analysis,_______ assesses how easily suppliers may drive up prices.

  1. buyer power

  2. supplier power

  3. threat of new entry

  4. threat of substitution
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
As per Porter's Forces Analysis, supplier power assesses how easily suppliers may drive up prices.The Porter's five forces tool is a simple but powerful tool to evaluate the power of business.Porter's Forces Analysis assumes that there are important forces that determine competitive power in a business situation. These are: a) Supplier power,
b) Buyer power,
c) Competitive rivalry,
d) Threat of substitution,
e)  Threat of new entry
Multiple choice business organisation and correspondence meaning and factors of business environment dimensions of business environment business environment and its dimensions business environment

As per Porter's Forces Analysis, _________ evaluates how easy it is for buyers to drive prices down.

  1. buyer power

  2. supplier power

  3. threat of new entry

  4. threat of substitution
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
The Porter's five forces tool is a simple but powerful tool to evaluate the power of business.Porter's Forces Analysis assumes that there are important forces that determine competitive power in a business situation. These are: a) Supplier power,
b) Buyer power,
c) Competitive rivalry,
d) Threat of substitution,
e)  Threat of new entryAs per Porter's Forces Analysis, supplier power assesses how easily suppliers may drive up prices.As per Porter's Forces Analysis, buyer power evaluates how easy it is for buyers to drive prices down.
Multiple choice business economics and quantitative methods foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

When there is excess demand for a commodity, the 'Law of demand' implies that __________.

  1. price of the commodity falls

  2. price of the commodity remains same

  3. price of the commodity rises

  4. quantity demanded of the commodity falls
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

According to the law of demand, when demand exceeds supply (excess demand), the scarcity of the commodity puts upward pressure on its price until the market reaches equilibrium.

Multiple choice business economics and quantitative methods foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

Supply of perishable goods is inelastic.

  1. True

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

Perishable goods cannot be stored for long periods, so producers must sell them regardless of the price, making their supply relatively unresponsive to price changes in the short run.

Multiple choice business economics and quantitative methods foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

Total outlay is price multiplied by quantity. 

  1. True

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

Total outlay is another method to measure elasticity of demand this is also known as the expenditure method, Total outlay is calculated by taking into account the total expenditure which Is price multiplied by quantity.