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 question:
The resources for satisfying human wants are:
-
limited
-
unlimited
-
available at zero price
-
none of these
A
Correct answer
Explanation
A fundamental premise of economics is that resources are finite or limited relative to the infinite nature of human desires. This scarcity is the basis for all economic decision-making.
$TR > TC$ is a situation of ________.
-
normal profit
-
rising profits
-
abnormal profits
-
falling profits
C
Correct answer
Explanation
When total revenue exceeds total cost, the firm is making a profit above the normal level, which is termed abnormal or supernormal profit.
$M p = f (y)$ is denoted for ____________________.
-
Transactionary motive
-
Precautionary motive
-
Speculative motive
-
demand for money
B
Correct answer
Explanation
In Keynesian economics, the precautionary motive for holding money is often modeled as a function of income (y).
______________ is the profit earned by the firm because of its monopoly control.
-
Oligopolist profit
-
Monopoly profit
-
Monopsony profit
-
Excess profit
B
Correct answer
Explanation
Monopoly profit is the excess profit earned by a firm due to its ability to restrict output and set prices above the competitive level, facilitated by its exclusive control over the market.
In a long run equilibrium of a competitive firm ___________.
-
$AR < AC$
-
$AR > AC$
-
$AC > AR$
-
$AR = LRAC$
In a long run equilibrium of a competitive firm _______________.
-
fixed cost vanishes
-
Average fixed cost curve vanishes
-
Average total cost are present
-
All of the above
D
Correct answer
Explanation
In the long run, all costs are variable, meaning there are no fixed costs. Therefore, the average fixed cost curve disappears, and the firm's costs are represented by the long-run average total cost curve.
If the firm increases its output even after $MR = MC$ and an equilibrium is struck, then:
-
$MR$ becomes greater than $MC$
-
$MC$ becomes greater than $MR$
-
$MR$ stays equal to $MC$
-
none of these
B
Correct answer
Explanation
If a firm produces beyond the point where Marginal Revenue (MR) equals Marginal Cost (MC), the cost of producing the additional unit (MC) will exceed the revenue gained from it (MR), thereby reducing total profit.
The concept of (P=MC) represents:
-
Profit maximization
-
Cost minimization
-
Perfect competition
-
Monopoly
A
Correct answer
Explanation
The equation (P=MC) represents profit maximization, which occurs when a firm produces the quantity of output where price is equal to marginal cost.
What is the law of demand?
-
As price increases, quantity demanded decreases.
-
As price decreases, quantity demanded increases.
-
Quantity demanded is independent of price.
-
None of the above
A
Correct answer
Explanation
The law of demand states that, all other factors being equal, as the price of a good or service increases, the quantity demanded of that good or service will decrease.
What is the law of supply?
-
As price increases, quantity supplied increases.
-
As price decreases, quantity supplied decreases.
-
Quantity supplied is independent of price.
-
None of the above
A
Correct answer
Explanation
The law of supply states that, all other factors being equal, as the price of a good or service increases, the quantity supplied of that good or service will increase.
What is market equilibrium?
-
The point where supply and demand are equal.
-
The point where price is at its highest.
-
The point where quantity is at its lowest.
-
None of the above
A
Correct answer
Explanation
Market equilibrium is the point where the quantity of a good or service that suppliers are willing and able to supply is equal to the quantity of that good or service that consumers are willing and able to buy.
What is producer surplus?
-
The difference between the price producers receive and the price they are willing to accept.
-
The difference between the price consumers pay and the price producers receive.
-
The total amount of money producers receive for a good or service.
-
None of the above
A
Correct answer
Explanation
Producer surplus is the difference between the price that producers receive for a good or service and the price that they are willing to accept.
Which of the following is a characteristic of a perfectly competitive market in the agricultural fisheries industry?
-
Many buyers and sellers
-
Homogeneous products
-
Price is determined by supply and demand
-
All of the above
D
Correct answer
Explanation
A perfectly competitive market is characterized by many buyers and sellers, homogeneous products, and price being determined by the forces of supply and demand.
Which of the following is a common type of market structure in the agricultural fisheries industry?
-
Monopoly
-
Oligopoly
-
Monopolistic competition
-
Perfect competition
B
Correct answer
Explanation
Oligopoly is a common market structure in the agricultural fisheries industry, where a small number of large firms control a significant share of the market.
What is the primary factor determining the demand for fish in the agricultural fisheries market?
-
Consumer preferences
-
Price of fish
-
Availability of substitutes
-
All of the above
D
Correct answer
Explanation
The demand for fish in the agricultural fisheries market is influenced by consumer preferences, price of fish, and the availability of substitutes.