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

Price mechanism will operate only when the market is regulated by the government.

  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

Producers will __________ the available resources when a change in price, and thus, a change in the profit, occurs.

  1. reallocate

  2. rearrange

  3. return

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

In Price mechanism 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 if there is any changes in the price, the available resource also changes which is reflected inthe profit margin. 

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

Tastes and preferences of the consumers are reflected through the market in the form of prices they are ____________.

  1. forced to pay

  2. required to pay

  3. willing to pay

  4. either A or C
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The consumers demand only those goods from which they are able to derive proper utility against which they pay prices. Therefore, if consumers taste and preference for the commodity is high they will derive more utility out of it and they will pay more price for 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

Absence of perfect competition under price mechanism leads to ____________.

  1. reallocation of resources

  2. misallocation of resources

  3. optimum allocation of resources

  4. no allocation of resources
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 and purchase by the demand sector. Therefore for price mechanism to operate freely, the market should be perfectly competitive because in a perfectly competitive market, the mobility of the factors of production is efficient.
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 has failed to function efficiently because _____________.

  1. perfect competition does not exist

  2. of creation of economic instability

  3. there is inequality in distribution of income and wealth

  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 and purchase by the demand sector. Therefore for price mechanism to operate freely, the market should be perfectly competitive without any intervention with stability in the demand and supply situation that depends upon the distribution of income and wealth in the economy.

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

Free operating of price mechanism has led to the evils of monopoly power in the hands of the __________.

  1. consumers

  2. producers

  3. government

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

In Price mechanism 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 purchase by the demand sector i.e demand will increase if price decreases and vice-versa. But producer sector is in high dominance compared to the consumer sector as they had to supply the goods to the market so they fraudulently affect the price of the goods by their operations. 

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

Other factors remaining constant, when price of a commodity rises, there is _____ of supply.

  1. expansion

  2. contraction

  3. decrease

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

According to the law of supply, when the price of a commodity increases, the supply of the commodity increases and when the price of the commodity decreases, the supply of the commodity decreases. We can see that the law of supply has a direct relationship between supply and price. Hence, other factors remaining constant, when price of a commodity rises, there is expansion of 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

If there is a price ceiling, which of the following is NOT likely to occur?

  1. Rationing by first-come first-served basis

  2. Black markets

  3. Grey markets

  4. All sellers providing goods for free that were formerly not free
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Price ceiling is the maximum price the seller can charge to the customer. Government imposes price ceiling to protect the consumers. Price ceiling will lead to shortage as demand will exceed supply. This leads to black marketing, rationing by fist come first serve. Price ceiling is giving goods at a price that is fixed by government, the supplier cannot charge beyond that price. Hence, some price is charged even it is minimal but is not free of cost. Hence all the statements except D is incorrect. 

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
When some resources are shifted from Use-$1$ to Use-$2$ (given technology and resources), the marginal rate of transformation _____________, as per the concept of PPC.

  1. increases

  2. decreases

  3. remains constant

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

When some resources are shifted from Use-1 to Use-2( given technology and resources) the marginal rate of transformation increases, as per the concept of Production possibility curve.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 or marginal rate of transformation.  

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

The imposition of ceiling on a monopoly's price will affect his ____________.

  1. profits only

  2. average revenue in the short-run only

  3. equilibrium output only

  4. equilibrium output and profits
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The imposition of price ceiling on monopoly's price will affect his equilibrium output and price. A monopoly is a price maker and influences the market as there are no close substitutes or competitors of the monopolist. By imposing a price restriction the government is restricting the price and there by converting the monopoly market like a competitive one. Hence, the equilibrium output and price will change because of the price ceiling. 

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Lack of double coincidence of wants exists under barter system because of difficulty in simultaneous fulfillment of mutual wants of buyers and sellers. 

  1. True

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

Lack of double coincidence exists in barter exchange. It  refers to the situation where the mutual wants of the buyer and seller are less likely to be fulfilled simultaneously.  If the buyer's wants can be fulfilled by exchange but cannot provide what the seller wants, the exchange is unlikely to happen.

Multiple choice business economics and quantitative methods introduction to micro economics microeconomics and macroeconomics : introduction economic ideas of j k mehta micro and macro economics

'Ceteris paribus' clause in the law of demand does not mean ___________.

  1. the price of the commodity does not change

  2. the price of its substitutes does not change

  3. the income of the consumer does not change

  4. the price of complementary goods does not change
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

'Ceteris paribus' means 'other things being equal'. This clause in the law of demand refers to other things except price being equal. Hence, it does not mean the price of the commodity does not change, under the law of demand.

Multiple choice business economics and quantitative methods introduction to micro economics microeconomics and macroeconomics : introduction economic ideas of j k mehta micro and macro economics

Example of micro economic variable is:

  1. Wholesale price index

  2. National income

  3. Market demand

  4. Aggregate demand
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Microeconomics is defined as "The study of the economic choices individuals and firms make and of how these choices create markets." Thus the study of microeconomics looks at specific markets individually and in great detail. Thus it will tend to examine micro variables such as the demand specific to a particular market or good. It will not be concerned with the aggregate market demand, or any other aggregate variables that treat the economy as one unit.