MCQOPTIONS
Saved Bookmarks
MCQOPTIONS
This section includes 75 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Which of the following statements is normative ? |
| A. | Large government deficits cause an economy to grow more slowly |
| B. | People work harder if the wage is higher |
| C. | The unemployment rate should be lower |
| D. | Printing too much money causes inflation |
| Answer» D. Printing too much money causes inflation | |
| 2. |
Which of the following statements regarding the circular-flow diagram is true ? |
| A. | If Susan works for BAe Systems and receives a salary payment, the transaction takes place in the market for good and services. |
| B. | If BAe Systems sells a military aircraft, the transaction takes place in the market for factors for production |
| C. | None of these |
| D. | The factors of production are owned by households |
| Answer» E. | |
| 3. |
Which of the following will not shift a country’s production possibilities frontier outward ? |
| A. | an advance in technology |
| B. | an increase in the labor force |
| C. | an increase in the capital stock |
| D. | a reduction in unemployment |
| Answer» E. | |
| 4. |
Which of the following statements about microeconomics and macroeconomics is not true ? |
| A. | The study of very large industries is a topic within macroeconomics |
| B. | Macroeconomics is concerned with economy-wide phenomena |
| C. | Microeconomics is a building block for macroeconomics |
| D. | Microeconomics and macroeconomics cannot be entirely separated |
| Answer» B. Macroeconomics is concerned with economy-wide phenomena | |
| 5. |
Which of the following issues is related to microeconomics ? |
| A. | the impact of oil prices on car production |
| B. | The impact of money on inflation |
| C. | The impact of technology on economics growth |
| D. | The impact of the deficit on saving |
| Answer» B. The impact of money on inflation | |
| 6. |
Which of the following is not a factor of production ? |
| A. | labor |
| B. | land |
| C. | money |
| D. | capital |
| Answer» D. capital | |
| 7. |
Which of the following is most likely to produce scientific evidence about a theory ? |
| A. | A lawyer employed by Renault addressing the impact of air bags on passenger safety. |
| B. | An economist permanently employed at a leading university analyzing the impact of bank regulations on lending to small businesses |
| C. | An economist employed by the Trades union congress doing research on the impact of trade policy on workers’ wages |
| D. | A radio talk show host collecting data from listeners on how capital markets respond to taxation |
| Answer» C. An economist employed by the Trades union congress doing research on the impact of trade policy on workers’ wages | |
| 8. |
Which of the following is a variable cost in the short run ? |
| A. | rent on the factory |
| B. | wages paid to factory labor |
| C. | interest payments on borrowed financial capital |
| D. | payments on the lease for factory equipment |
| E. | salaries paid to upper management |
| Answer» F. | |
| 9. |
Where a tax can be shifted the incidence depends on ? |
| A. | whether there is perfect or imperfect information |
| B. | who is legally obliged to pay the tax |
| C. | elasticities of demand and supply |
| D. | how many producers there are: |
| Answer» D. how many producers there are: | |
| 10. |
When marginal costs are below average total costs ? |
| A. | average fixed cost is rising |
| B. | average total cost is falling |
| C. | average total cost is raising |
| D. | average total cost is minimized |
| Answer» C. average total cost is raising | |
| 11. |
Vertical equity holds that ? |
| A. | those will equal ability to pay should bear equal tax burdens. |
| B. | those who benefit the most from government service should bear the higher tax burden |
| C. | those with equal ability to pay should bear unequal burdens |
| D. | those with greater ability to pay should pay more |
| Answer» E. | |
| 12. |
VAT is a good example of which kind of tax ? |
| A. | specific |
| B. | Direct |
| C. | Ad valorem |
| D. | Excise duty |
| Answer» D. Excise duty | |
| 13. |
Utilitarianism suggests that the government should choose policies that maximize the total utility of everyone in society by ? |
| A. | redistributing income from rich to poor because this is what the members of society would choose to do if they were behind a veil of ignorance |
| B. | redistributing income from rich to poor because due to the diminishing marginal utility of income, taking a pound from the rich reduces their utility |
| C. | allowing each individual to maximize their own utility without interference from the government |
| D. | redistributing income from rich to poor because this would maximize the well-being of the worst-off person in society |
| Answer» C. allowing each individual to maximize their own utility without interference from the government | |
| 14. |
Unemployment benefits may increase the unemployment rate because unemployment benefits ? |
| A. | encourage people to quit their jobs |
| B. | reduce the cost of job search |
| C. | enable people to quit searching for work |
| D. | reduce the benefits of additional job searching |
| Answer» C. enable people to quit searching for work | |
| 15. |
The total amount of tax you pay divided by your total income is the ? |
| A. | average tax rate |
| B. | marginal tax rate |
| C. | proportional tax rate |
| D. | total tax rate |
| Answer» E. | |
| 16. |
The term ‘rent’ as it is used by economists. refers to ? |
| A. | the return to any factor of production that is in fixed supply |
| B. | the profit earned by the owner of any housing unit. |
| C. | the amount paid each year by a tenant for an apartment |
| D. | any profit earned by stockholders when they sell their stock |
| Answer» B. the profit earned by the owner of any housing unit. | |
| 17. |
The substitution effect of higher wages suggests that as the wage rate increases ? |
| A. | leisure becomes less expensive and households buy more of it |
| B. | leisure becomes more expensive and households buy more of it |
| C. | leisure becomes more expensive and households buy less of it |
| D. | leisure becomes less expensive and households buy less of it. |
| Answer» D. leisure becomes less expensive and households buy less of it. | |
| 18. |
The stock of knowledge, skills and talents that people possess is called ? |
| A. | training investment |
| B. | skill capital |
| C. | skill-building investment |
| D. | human capital |
| Answer» E. | |
| 19. |
The scientific method requires that ? |
| A. | the scientist be objective |
| B. | The scientific use precision equipment. |
| C. | only correct theories are tested |
| D. | only theories are tested. |
| E. | the scientist uses test tubes and have clean lab. |
| Answer» B. The scientific use precision equipment. | |
| 20. |
The poverty trap refers to ? |
| A. | a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more income for themselves and the |
| B. | a situation in which workers are unable to find jobs. |
| C. | a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more because doing so will reduce |
| D. | a situation in which those receiving state benefits are discriminated against by employers and so find it more difficult to find jobs. |
| Answer» D. a situation in which those receiving state benefits are discriminated against by employers and so find it more difficult to find jobs. | |
| 21. |
The maximin criterion suggested by Rawls’s theory of justice means that the government should aim to ? |
| A. | Maximize the total utility of society |
| B. | Maximize the well-being of the worst-off person in society |
| C. | minimize the difference between the rich and poor |
| D. | maximize the economic freedom of individuals by minimizing government interference in private decision making |
| E. | minimize the well-being of the best-off person in society |
| Answer» C. minimize the difference between the rich and poor | |
| 22. |
The marginal revenue product of labour is ? |
| A. | the marginal product of capital times the price of labour. |
| B. | the additional revenue a firm earns by employing on additional unit of labour |
| C. | the additional profit a firms earns by employing one additional unit of labour |
| D. | the additional revenue the firm makes by selling one unit of labour. |
| Answer» E. | |
| 23. |
The idea that the demand for car workers stems from the demand for cars is ? |
| A. | output demand |
| B. | indirect demand |
| C. | derived demand |
| D. | the value of the marginal product of auto workers. |
| Answer» D. the value of the marginal product of auto workers. | |
| 24. |
The greatest advantage of a negative income tax is that it ? |
| A. | generates a smaller disincentive to work than most alternative anti-poverty policies. |
| B. | reduces the cost to the government of fighting poverty |
| C. | would not provide benefits to lazy people |
| D. | ensures that the poor actually receive what the government thinks they need does all these answers. |
| Answer» B. reduces the cost to the government of fighting poverty | |
| 25. |
The Gini coefficient is ? |
| A. | the ratio of the percentage of total income received by the top 20% of families to the percentage of total income received by by the bottom 20% of fam |
| B. | the most common way of representing the income distribution graphically |
| C. | a commonly used measure of the degree of inequality in an income distribution |
| D. | a commonly used measure of the degree of inequity in an income distribution |
| Answer» B. the most common way of representing the income distribution graphically | |
| 26. |
The formula for the marginal revenue product of labour (L is for labour, X is the product) is ? |
| A. | MPL + PX |
| B. | (MPL) (PX) |
| C. | PX/MPL |
| D. | MPL/PX |
| Answer» D. MPL/PX | |
| 27. |
The efficient scale of production is the quantity of output that minimizes ? |
| A. | average fixed cost |
| B. | average total cost |
| C. | average variable cost |
| D. | marginal cost |
| Answer» C. average variable cost | |
| 28. |
The Benazir Benefit income Scheme is a good example of ? |
| A. | a benefit in kind. |
| B. | a means tested cash benefit |
| C. | a universal (social insurance based) benefit |
| D. | none of the above |
| Answer» B. a means tested cash benefit | |
| 29. |
Rawls’s suggestion that policy should be directed at maximizing the welfare of the least well off person in society is derived from ? |
| A. | the idea that people should consider policy as if behind a veil of ignorance as to what their circumstances might be in society, and the idea that as |
| B. | the idea that people should consider policy as if behind a veil of ignorance as to what their circumstances might be in society, and the idea that peo |
| C. | the idea that people a veil of ignorance as policy as if behind a veil of ignorance as to what their circumstances might be in society, and the ignora |
| D. | the idea that everyone in society should have an equal income |
| Answer» C. the idea that people a veil of ignorance as policy as if behind a veil of ignorance as to what their circumstances might be in society, and the ignora | |
| 30. |
Rawls’s miximin criterion does not mean that there should be redistribution so as to equalise everyone’s incomes in society because ? |
| A. | Such redistribution would mean that those who worked hard were no better off than those who were lazy and this would be unfair. |
| B. | such redistribution would not maximize the total income of all members of society |
| C. | Such redistribution would remove the incentive to work hard, so society’s total income would fall, and so the least well off person would be worse o |
| D. | such redistribution would amount to confiscation of honestly earned income from higher earners and so would be unjust. |
| Answer» D. such redistribution would amount to confiscation of honestly earned income from higher earners and so would be unjust. | |
| 31. |
Rank utilitarianism liberalism, and libertarianism in sequence from the political philosophy that would redistribute income the greatest to the one that would redistribute income the least? |
| A. | utilitarianism, liberalism, libertarianism |
| B. | All three political philosophies argue for similar degree of income redistribution |
| C. | liberalism, libertarianism, utilitarianism |
| D. | libertarianism liberalism, utilarianism |
| E. | libertariansim, utilitarianism, libertarianism |
| Answer» F. | |
| 32. |
Positive statements are ? |
| A. | Macroeconomic |
| B. | Microeconomics |
| C. | statements of description that can be tested |
| D. | Statements of prescription that involve value judgments. |
| Answer» D. Statements of prescription that involve value judgments. | |
| 33. |
Points on the production possibilities frontier are ? |
| A. | inefficient |
| B. | normative |
| C. | unattainable |
| D. | efficient |
| Answer» E. | |
| 34. |
Permanent income is ? |
| A. | Social Security income of the elderly and disabled |
| B. | none of these answers |
| C. | wages fixed by a union or other labour contract |
| D. | equal to the minimum wage |
| E. | a person’s normal or average income |
| Answer» F. | |
| 35. |
New technology in the form of computer spreadsheets has increased the productivity of accountants. This will cause ? |
| A. | the demand curve for accountants to shift to the right, since the productivity of accountants has increased |
| B. | firms to move up their demand curves for accountants |
| C. | the demand curve for accountants to shift to the left, since it requires fewer accountants than it did before to do the same amount of work. |
| D. | firms to move down their demand curves for accountants |
| Answer» B. firms to move up their demand curves for accountants | |
| 36. |
Naila owns a small pottery factory. She can make 1000 pieces of pottery per year and sell them for Rs 100 each. It costs Naila Rs 20,000 for the raw materials to produce the 1,000 pieces of pottery She has invested Rs100,000 in her factory and equipment: Rs50,000 from her savings and Rs50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 her per cent, too) Naila can work at a competing pottery factory for Rs40,000 per year. The accounting profit at Naila’s pottery factory is ? |
| A. | Rs30,000 |
| B. | Rs35,000 |
| C. | Rs75,000 |
| D. | Rs70,000 |
| Answer» D. Rs70,000 | |
| 37. |
Naila owns a small pottery factory. She can make 1000 pieces of pottery per year and sell them for Rs 100 each. It costs Naila Rs 20,000 for the raw materials to produce the 1,000 pieces of pottery She has invested Rs100,000 in her factory and equipment: Rs50,000 from her savings and Rs50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 her per cent, too) Naila can work at a competing pottery factory for Rs40,000 per year. The economics profit at Naila’s pottery factory is ? |
| A. | Rs80,000 |
| B. | Rs30,000 |
| C. | Rs75,000 |
| D. | Rs70,000 |
| Answer» C. Rs75,000 | |
| 38. |
Mariam earns more than Seamus and she came by her income fairly and honestly which of the following political philosophies would argue against the redistribution of income from Mariam to Seamus ? |
| A. | all of these answers |
| B. | libertarianism |
| C. | utilitarianism |
| D. | none of these answers |
| Answer» C. utilitarianism | |
| 39. |
In which of the following cases is the assumption most reasonable ? |
| A. | To address the impact to taxes on income distribution an economist assumes that everyone earns the same income. |
| B. | To address the impact of money growth on inflation, an economist assumes that money is strictly coins. |
| C. | To model the benefits of trade. an economist assumes that there are two people and two goods |
| D. | To estimate the speed at which a beach ball falls, a physicist assumes that if falls in a vacuum. |
| Answer» D. To estimate the speed at which a beach ball falls, a physicist assumes that if falls in a vacuum. | |
| 40. |
In the long run, if a very small factory were to expand its scale of operations it is likely that it would initially experience ? |
| A. | an increase in average total costs |
| B. | diseconomies of scale |
| C. | economies of scale |
| D. | constant returns to scale |
| Answer» D. constant returns to scale | |
| 41. |
In Pakistan the term the poverty trap is used to describe the fact that ? |
| A. | poor people are excluded from most leisure and social activities |
| B. | the Pakistan benefit system makes being poor vary degrading |
| C. | if poor people earn more their benefits fall, making them no better off. |
| D. | in the Pakistan poor people are heavily taxed |
| Answer» D. in the Pakistan poor people are heavily taxed | |
| 42. |
In making which of the following statements is an economist acting more like a scientist ? |
| A. | A reduction in unemployment benefits will reduce the unemployment benefits will reduce the unemployment rate. |
| B. | The rate of inflation should be reduced because it robs the elderly of their savings. |
| C. | The unemployment rate should be reduced because unemployment robs individuals of their dignity. |
| D. | The state should increase subsidies to universities because the future of our country depends on education. |
| Answer» B. The rate of inflation should be reduced because it robs the elderly of their savings. | |
| 43. |
In a competitive labour market firms will hire labour up to the point where the marginal revenue product of labour equals ? |
| A. | total labour cost |
| B. | the marginal product |
| C. | the price of the product |
| D. | the wage rate |
| Answer» C. the price of the product | |
| 44. |
If there are implicit costs of production ? |
| A. | accounting profit will exceed economic profit |
| B. | economic profit will always be zero |
| C. | economic profit will exceed accounting profit |
| D. | accounting profit will always be zero |
| E. | economic profit and accounting profit will be equal |
| Answer» B. economic profit will always be zero | |
| 45. |
If the income effect is smaller than the substitution effect, higher net wages will ? |
| A. | reduce the supply of labour. |
| B. | increase the demand for labour |
| C. | increase the supply of labour |
| D. | have no effect on the supply of labour |
| Answer» D. have no effect on the supply of labour | |
| 46. |
If people can borrow and lend to perfectly smooth out their lifetime living standards, then ? |
| A. | transitory income is a good measure of the distribution of living standards |
| B. | none of these answers |
| C. | permanent income is a good measure of the distribution of living standards. |
| D. | life-cycle income is a good measure of the distribution of living standards. |
| E. | current annual income is a good measure of the distribution of living standards. |
| Answer» D. life-cycle income is a good measure of the distribution of living standards. | |
| 47. |
If output price is constant, the marginal revenue product of labour curve will have the same shape as the ? |
| A. | total variable cost curve |
| B. | marginal cost curve |
| C. | total product of labour curve |
| D. | marginal product of labour curve |
| Answer» E. | |
| 48. |
If marginal costs equal average total costs ? |
| A. | average total cost is falling |
| B. | average total cost is raising |
| C. | average total cost is maximized |
| D. | average total cost is minimized |
| Answer» E. | |
| 49. |
If labour market discrimination crowds women into a limited number of occupations so that the number of occupations available to men increases, then ? |
| A. | wages of men will be higher but the marginal productivity of men will be lower than it otherwise would be |
| B. | the wages of men will be lower but the marginal productivity of men will be higher than it otherwise would be |
| C. | both the wages and the marginal productivity of men will be lower than they otherwise would be |
| D. | both the wages and the marginal productivity of men will be higher than they otherwise would be |
| Answer» E. | |
| 50. |
If as the quantity produced increase a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will ? |
| A. | be flat (horizontal) |
| B. | slope upward |
| C. | slope downward |
| D. | be U-shaped. |
| Answer» E. | |