MCQOPTIONS
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MCQOPTIONS
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 | |
| 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. | |
| 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 | |
| 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. | |
| 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 | |
| 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 | |
| 7. |
Market failure may arise because of ? |
| A. | imperfect competition |
| B. | taxation |
| C. | externalities |
| D. | missing markets |
| E. | all of the above |
| Answer» F. | |
| 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. | |
| 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 | |
| 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. | |
| 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 | |
| 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. | |
| 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 | |
| 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. | |
| 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. | |
| 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 | |
| 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. | |
| 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 | |
| 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. | |
| 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 | |
| 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. | |
| 22. |
The price mechanism does not act as a ? |
| A. | Signal |
| B. | Incentive |
| C. | Rationing device |
| D. | Indicator of income |
| Answer» E. | |
| 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 | |
| 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. | |
| 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 | |
| 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 | |
| 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 | |
| 28. |
All of the following are types of imperfect competition except ? |
| A. | monopolistic competition |
| B. | oligopoly |
| C. | monopoly |
| D. | unfair competition |
| Answer» E. | |
| 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. | |
| 30. |
In a free market system rationing occurs when there are increases in ? |
| A. | price |
| B. | quantity |
| C. | demand |
| D. | supply |
| Answer» E. | |
| 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 | |
| 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. | |
| 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 | |
| 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. | |
| 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 | |
| 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 | |
| 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 | |
| 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 | |
| 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 | |
| 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 | |
| 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 | |
| 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 | |
| 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 | |
| 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. | |
| 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 | |
| 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. | |
| 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. | |
| 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. | |
| 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 | |
| 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 | |