Explore topic-wise MCQs in Economics Mcqs.

This section includes 135 Mcqs, each offering curated multiple-choice questions to sharpen your Economics Mcqs knowledge and support exam preparation. Choose a topic below to get started.

1.

A public good will ?
A. Be under provided in the free market
B. Be over provided in the free market
C. Not be provided in the free market
D. Has no opportunity cost
Answer» D. Has no opportunity cost
Discussion
2.

Satellite television subscription and television detection devices are ways in which broadcasting companies address the ________ problem?
A. externality
B. market imperfection
C. deadweight burden
D. free rider
Answer» E.
Discussion
3.

A positive externality occurs when ?
A. The social marginal costs are higher than the private marginals costs
B. A product is not provided in the free market
C. The social marginal cost equal the social marginal benefit
D. The social marginal benefits are higher than the private marginal benefits
Answer» B. A product is not provided in the free market
Discussion
4.

An increase (rightward shift) in the demand for a good will tend to cause ?
A. an increase in the equilibrium price and quantity
B. none of these answers
C. an increase in the equilibrium price and a decrease in the equilibrium quantity
D. a decrease in the equilibrium quantity.
E. a decrease in the equilibrium price and quantity.
Answer» F.
Discussion
5.

If the price of good is below the equilibrium price ?
A. there is a shortage and the price will rise
B. the quantity demanded is equal to the quantity supplied and the price remains unchanged
C. there is a shortage and the price will fall
D. there is a surplus and the price will rise
Answer» B. the quantity demanded is equal to the quantity supplied and the price remains unchanged
Discussion
6.

Which of the following statements is true about the impact of an increase in the price of lettuce ?
A. Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall
B. The supply of lettuce will decrease
C. The demand for lettuce will decrease
D. The equilibrium price and quantity of salad dressing will fall
E. The equilibrium price and quantity of salad dressing will rise
Answer» E. The equilibrium price and quantity of salad dressing will rise
Discussion
7.

Market failure may arise because of ?
A. imperfect competition
B. taxation
C. externalities
D. missing markets
E. all of the above
Answer» F.
Discussion
8.

Suppose consumer tastes shift toward the consumption of apples Which of the following statements is an accurate description of the impact of this event on the market for apples ?
A. There is an increase in the quantity demanded of apples and in the supply for apples
B. There is an increase in the demand and supply of apples.
C. There is an increase in the demand for apples and a decrease in the supply of apples
D. There is a decrease in the quantity demanded of apples and an increase in the supply for apples
E. There is an increase in the demand for apples and an increase in the quantity supplied of apples.
Answer» F.
Discussion
9.

A good example of a public good is ?
A. public transport
B. the national health service
C. national defence
D. rail transport
Answer» D. rail transport
Discussion
10.

Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect?
A. the equilibrium quantity to rise and the equilibrium price to rise
B. the equilibrium quantity to rise and the equilibrium price to fall
C. the equilibrium quantity to rise and the equilibrium price to remain constant
D. the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise
E. the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
Answer» F.
Discussion
11.

All of the following shift the supply of watches to the right except ?
A. an advance in the technology used to manufacture watches
B. an increase in the price of watches
C. All of these answers cause an increase in the supply of watches
D. a decrease in the wage of workers employed to manufacture watches
Answer» C. All of these answers cause an increase in the supply of watches
Discussion
12.

The price mechanism cannot ?
A. Act as a signal
B. Act as a incentive
C. Act as a rationing device
D. shift the demand curve
Answer» E.
Discussion
13.

A shift in demand will have more effect on price than quantity if ?
A. The price elasticity of supply is + 3
B. The price elasticity of supply is + 0.2
C. The price elasticity of supply is + 2
D. The price elasticity of supply is infinity
Answer» D. The price elasticity of supply is infinity
Discussion
14.

A monopolistic market has ?
A. many buyers and sellers
B. none of these answers
C. firms that are price takers
D. only one seller
Answer» E.
Discussion
15.

If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are ?
A. Complements
B. inferior goods
C. normal goods
D. none of these answers
E. Substitutes
Answer» F.
Discussion
16.

The law of supply states that an increase in the price of a good ?
A. none of these answers
B. increases the quantity supplied of that good
C. increase the supply of that good
D. decrease the demand for the good
E. decrease the quantity demanded for that good
Answer» C. increase the supply of that good
Discussion
17.

The problem posed by a natural monopoly is that it faces a _____ This means that _______?
A. increasing average cost curve, marginal cost lies above average cost
B. increasing average cost curve, marginal cost lies below average cost
C. decreasing average cost curve marginal cost lies above average cost
D. decreasing average cost curve, marginal cost lies below average cost
Answer» E.
Discussion
18.

A decrease in demand for a products should ?
A. increase equilibrium price and quantity
B. Decrease equilibrium price and quantity
C. Increase equilibrium price and decrease quantity
D. Decrease equilibrium price and increase quantity
Answer» C. Increase equilibrium price and decrease quantity
Discussion
19.

Income inequality can be high in the free market and should be reduced This is an example of What ?
A. Judicial economic statement
B. Positive economic statement
C. Formative economic statement
D. Normative economic statement
Answer» E.
Discussion
20.

A subsidy paid to producers ?
A. Shifts the supply curve
B. shifts the demand curve
C. Leads to a contractions in supply
D. Leads to an extension of supply
Answer» B. shifts the demand curve
Discussion
21.

A shift in supply will have a bigger effect on price than output if demand is ?
A. income elastic
B. income inelastic
C. Price elastic
D. Price inelastic
Answer» E.
Discussion
22.

The price mechanism does not act as a ?
A. Signal
B. Incentive
C. Rationing device
D. Indicator of income
Answer» E.
Discussion
23.

If the price was fixed below the equilibrium price there would be ?
A. Excess supply
B. Excess demand
C. Equilibrium
D. Downward pressure on prices
Answer» C. Equilibrium
Discussion
24.

The government is considering placing a tax on cigarettes to raise revenue to finance health-care benefits. The demand for cigarettes is price inelastic Which of the following statements is True ?
A. This tax will not raise much revenue either in the short term or the long term since demand is price inelastic
B. The tax on cigarettes may not raise as much revenue as anticipated in the years to com because the demand for cigarettes is likely to become more elas
C. This a very good way to raise revenue both in the short term and in the long term, because there are no substitutes for cigarettes.
D. No tax revenue can be raised in this way because sellers of cigarette will just lower their price by the amount of the tax and therefore, the price of
Answer» C. This a very good way to raise revenue both in the short term and in the long term, because there are no substitutes for cigarettes.
Discussion
25.

An example of an indirect tax is ?
A. VAT
B. inheritance tax
C. income tax
D. a tax on profits
Answer» B. inheritance tax
Discussion
26.

If a government were to fix a minimum wage for adult workers, economists would predict ?
A. wages in general would fall as employers tried to hold down costs
B. fewer young workers would be employed
C. the costs and prices of firms employing cheap labour would increase
D. there would be more unemployment
Answer» D. there would be more unemployment
Discussion
27.

An increase in income will ?
A. Lead to a movement along the demand curve
B. Shift the supply curve
C. Shift the demand curve
D. Lead to an extension of demand
Answer» D. Lead to an extension of demand
Discussion
28.

All of the following are types of imperfect competition except ?
A. monopolistic competition
B. oligopoly
C. monopoly
D. unfair competition
Answer» E.
Discussion
29.

Agricultural prices tend to be unstable because ?
A. Supply is price elastic
B. Demand is price elastic
C. Supply is stable
D. Demand and supply are price inelastic
Answer» E.
Discussion
30.

In a free market system rationing occurs when there are increases in ?
A. price
B. quantity
C. demand
D. supply
Answer» E.
Discussion
31.

If a maximum price is set below equilibrium there will be ?
A. A price fall
B. A price increase
C. Excess supply
D. Excess demand
Answer» D. Excess demand
Discussion
32.

Economics say that there has to be some from of rationing whenever ?
A. inflation occurs
B. there are externalities
C. merit goods are produced
D. there is excess demand
Answer» E.
Discussion
33.

A public good ?
A. Is provided by the government
B. Is free
C. Has the properties of being non-excludable and non-diminishable
D. Gas external costs
Answer» D. Gas external costs
Discussion
34.

The social costs of monopoly power arises because ?
A. marginal cost is set equal to marginal revenue
B. price is less than marginal cost
C. marginal consumer benefit is less than marginal revenue
D. there is too little output at too high a cost
Answer» E.
Discussion
35.

If the price in a market is fixed by the government above equilibrium ?
A. There is excess equilibrium
B. There is excess supply
C. There is excess demand
D. There is equilibrium
Answer» C. There is excess demand
Discussion
36.

If two firms doing the same thing in the same industry join together, this is known as a ?
A. vertical merger
B. horizontal merger
C. conglomerate merger
D. hostile takeover
Answer» C. conglomerate merger
Discussion
37.

Markets sometimes fail to exist because of________?
A. externalities
B. the free-rider problem
C. a and b
D. a and c
Answer» D. a and c
Discussion
38.

The effect of a tax to offset a negative externality will be to ____ price and ______ quantity?
A. reduce , reduce
B. increase, increase
C. increase, reduce
D. reduce, increase
Answer» D. reduce, increase
Discussion
39.

Taxes creates a wedge between the sales price and purchase price that prevents the price system equating ____ and ______?
A. marginal costs, marginal benefits
B. demand, supply
C. marginal cost, marginal revenue
D. marginal cost, average cost
Answer» B. demand, supply
Discussion
40.

Except for taxes to offset ______ taxes are ______?
A. imperfect competition popular
B. externalities , distortionary
C. inequality , a first best option
D. poor health, unnecessary
Answer» C. inequality , a first best option
Discussion
41.

Externalities arise because there is a divergence between ________ and _________?
A. private costs, private benefits
B. private costs, social costs or benefits
C. social costs, social benefit
D. insiders, outsiders
Answer» C. social costs, social benefit
Discussion
42.

If the consumption of good by one person does not reduce the quantity available by others and nobody can be easily excluded from consumption, we are referring to a ?
A. Private good
B. merit good
C. public good
D. abundant good
Answer» D. abundant good
Discussion
43.

The allocation of resources is not efficient if ?
A. the marginal cost of production does not equal society’s marginal benefit
B. the distribution is inequitable
C. economic growth is low
D. unemployment is high
Answer» B. the distribution is inequitable
Discussion
44.

We cannot say whether one allocation of resources is better than another allocation because ?
A. some people can’t count
B. some people may not be permanent resident
C. not all economic activity is legal
D. We can’t make value judgments to compare different people’s welfare
Answer» E.
Discussion
45.

In the insurance industry, high-risk customers are more likely to take out insurance. This is an example of ?
A. moral hazard
B. risk aversion
C. adverse selection
D. a poor gamble
Answer» D. a poor gamble
Discussion
46.

If my neighbour burns garden waste causing my house to fill with smoke this is an example of ?
A. a production externality
B. a second-best solution
C. transaction costs
D. a consumption externality
Answer» E.
Discussion
47.

An inferior good is one for which an increase in income causes a(n) ?
A. decrease in supply
B. increase in demand
C. increase in supply
D. decrease in demand
Answer» E.
Discussion
48.

A competitive equilibrium is Pareto-efficient because ?
A. Producers are price takers
B. consumers and producers face the same prices
C. marginal costs and benefits are equal
D. prices equal marginal cost and benefit
E. All of the above
Answer» F.
Discussion
49.

In Nash equilibrium each player chooses the best strategy ?
A. Assuming other players move first
B. dominated by the other players
C. given the strategies of other players
D. that is a credible threat
Answer» D. that is a credible threat
Discussion
50.

Which of the following is the government most likely to subsidies ?
A. Negative externalies
B. Positive externalities
C. Monopolies
D. Oligopolies
Answer» C. Monopolies
Discussion