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 foreign trade in india the government and economic development indian economy on the eve of independence impact of technology on livelihoods

The minimum assured price offered by the government to the farmers for the purchase of their output is called____________.

  1. ceiling price.

  2. equilibrium price.

  3. support price.

  4. market price.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The minimum assured price offered by the government to the farmers for the purchase of their output is called support price. This helps the farmers to get adequate remuneration for their crop yield. It saves the customers from losses. 

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 being perfectly inelastic, what will be the effect of increase or decrease in demand on price and equilibrium quantity?

  1. Price increases or decreases respectively.

  2. No effect on equilibrium quantity.

  3. Both (a) and (b).

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

In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded. The consumers do not change their demand due to the change in price. This usually is seen in case of necessities. Hence, the equilibrium quantity will be same the price might increase or decrease. 

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 will increase in supply bring down the price, leaving the quantity demanded unchanged?

  1. When the demand for the commodity is perfectly elastic.

  2. When the demand for the commodity is perfectly inelastic.

  3. When the demand for the commodity is relatively elastic.

  4. When demand for the commodity is unitary elastic.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the demand for a commodity is perfectly inelastic the change in price will have no effect on the quantity demanded. The consumers do not change their demand due to the change in price. This usually is seen in case of necessities. Hence, the equilibrium quantity will be same the price might increase or decrease. 

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

In a situation when productivity increases owing to improvement in technology, equilibrium price tends fall.

  1. True

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

True.
Owing to improvement in technology, supply of the good in the market will increase causing a rightward shift of the supply curve. Accordingly, equilibrium price will decrease.

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

Market price is always equal to or greater than the support price of a commodity.

  1. True

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

True.

In a situation of support price (which is the minimum price assured to the producers), market price ought to be equal to or greater than the support price.

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

In a state of increasing cost of production leading to a substantial cut in production, equilibrium price will fall.

  1. True

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

False.
With a substantial cut in production due to increase in cost of production, the supply curve shifts to the left and equilibrium price will, thus, increase.

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

In a situation of war when people are fearing shortage of rice, equilibrium price of rice tends to rise.

  1. True

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

True.
Fearing shortage of rice, the demand curve for rice will shift towards right, causing a rise in equilibrium price.

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


In a situation when import of inputs becomes expensive, equilibrium price of the commodity tends to rise.

  1. True

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

True.
When import of inputs becomes expensive, the cost of production rises, leading to a cut in supplies. The supply curve shifts to the left. Accordingly, equilibrium price of the commodity tends to rise.

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 no excess demand or excess supply in the market, everybody is equally satisfied (or nobody suffers any shortage).

  1. True

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

False.
When there is no excess demand or excess supply, the market clears. However, it does not mean that everybody is equally satisfied. At the given market price, some people may not be able to buy the product, and therefore, remain unsatisfied.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Prices under price mechanism are determined by the ____________.

  1. market forces of demand and supply

  2. government as well as firms

  3. producers alone

  4. factors of production
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In price mechanism, prices of commodities in the market are determined by the forces of demand and supply that generates open competition in the market which leads optimum distribution of goods and services. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Forces of demand and supply operate within the framework of a market.

  1. True

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa which generates within the framework of a market. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

______________ is the mechanism in which prices play a key role in directing the activities of producers, consumers and resource suppliers.

  1. Price mechanism

  2. Market mechanism

  3. Production mechanism

  4. Demand-supply mechanism
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. It also regulates the supply of resources in the economy as more resources are supplied if there is more demand for the commodity produced using it. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Price mechanism functions under the control of a specific controlling agency in the economy.

  1. True

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Price mechanism incorporates _________ in a market economy.

  1. rigidity

  2. flexibility

  3. severity

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e. supply will increase if price increases and vice-versa and the demand sector i.e. demand will increase if price decreases and vice-versa. Therefore, it adds more flexibility to the market economy because in market economy prices affect by the forces of demand and supply.  

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Identify the conditions that are a pre-requisite for the price mechanism to operate.

  1. Cost should reflect the sacrifice made in terms of resources.

  2. Producers should be able to anticipate demand correctly.

  3. Demand should reflect needs of the people.

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore, price mechanism will operate only when the producer sector will efficiently anticipate the demand by the needs of the people and supply the commodities where cost in the generation of the commodities must be reflected in terms of opportunity cost.