MCQOPTIONS
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MCQOPTIONS
This section includes 51 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 types of unemployment will exist even if the wage is at the competitive equilibrium ? |
| A. | Unemployment due to unions |
| B. | Unemployment due to efficiency wages |
| C. | Frictional Unemployment |
| D. | Unemployment due to minimum-wage laws |
| Answer» D. Unemployment due to minimum-wage laws | |
| 2. |
Which one of the following types of Unemployment results from the wage being held above the competitive equilibrium wage ? |
| A. | Structural unemployment |
| B. | Cyclical Unemployment |
| C. | Frictional Unemployment |
| D. | None of these answers |
| E. | Sectoral Unemployment |
| Answer» B. Cyclical Unemployment | |
| 3. |
Which of the following statements about efficiency wage theory is true ? |
| A. | Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities |
| B. | Firms do not have a choice about whether they pay efficiency wages or not because these wages are determined by law |
| C. | Paying the lowest possible wage is always the most efficient (Profitable) |
| D. | Paying above the competitive equilibrium wage may improve worker health lower worker turnover improve worker quality and increase worker effort |
| Answer» E. | |
| 4. |
Which of the following products is least likely to be sold in a monopolistically competitive market ? |
| A. | breakfast |
| B. | cotton |
| C. | video games |
| D. | beer |
| Answer» C. video games | |
| 5. |
Which of the following is true with regard to monopolistically competitive firms scale of production and pricing decisions Monopolistically competitive firms produce ? |
| A. | at the efficient scale and charge a price equal to marginal cost |
| B. | at the efficient scale and charge a price above marginal cost |
| C. | With excess capacity and charge a price above marginal cost |
| D. | With excess capacity and charge a price equal to marginal cost |
| Answer» D. With excess capacity and charge a price equal to marginal cost | |
| 6. |
Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly ? |
| A. | the monopolist faces a downward-sloping demand curve while the monopolistic competitor faces an elastic demand curve |
| B. | the monopolist charges a price above marginal cost while the monopolistic competitor charges a price equal to marginal cost |
| C. | The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run |
| D. | Both the monopolist and the monopolistic competitor operate at the efficient scale |
| Answer» D. Both the monopolist and the monopolistic competitor operate at the efficient scale | |
| 7. |
Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals ? |
| A. | marginal revenue and then use the demand curve to determine the price consistent with this quantity |
| B. | average total cost and then use the supply curve to determine the price consistent with this quantity |
| C. | marginal revenue and then use the supply curve to determine the price consistent with this quantity |
| D. | average total cost and then use the demand curve to determine the price consistent with this quantity |
| Answer» B. average total cost and then use the supply curve to determine the price consistent with this quantity | |
| 8. |
Which of the following is not put forth as a criticism of advertising and brand names ? |
| A. | Advertising manipulates people’s tastes to create a desire that otherwise would not exist |
| B. | Advertising increase competition Which causes unnecessary bankruptcies and layoffs. |
| C. | Advertising increases brand loyalty causes demand to be more inelastic and thus, increase mark-up over marginal cost. |
| D. | All of these answers are criticisms of advertising and brand names |
| Answer» C. Advertising increases brand loyalty causes demand to be more inelastic and thus, increase mark-up over marginal cost. | |
| 9. |
Which of the following is not an argument put forth by economists in support of the use of advertising ? |
| A. | Advertising increases competition |
| B. | Advertising provides information to customers about prices, new products and location of retail outlets. |
| C. | Advertising provides a creative outlet for artists and writers |
| D. | Advertising provides new firms with the means to attract customers from existing firms. |
| Answer» D. Advertising provides new firms with the means to attract customers from existing firms. | |
| 10. |
Which of the following is not a supply side measure ? |
| A. | Increased training |
| B. | Providing more information |
| C. | Helping individuals to move location to find work |
| D. | Increasing spending on existing industries |
| Answer» D. Increasing spending on existing industries | |
| 11. |
Which of the following is not a characteristic of a monopolistically competitive market ? |
| A. | free entry and exit |
| B. | long run economic profits |
| C. | many sellers |
| D. | differentiated products |
| Answer» C. many sellers | |
| 12. |
Which of the following is an example of a reason why firms might pay efficiency wages ? |
| A. | At equilibrium wages workers sleep when the boss is not looking because workers are not deeply concerned about being fired |
| B. | At equilibrium wages workers often quit to find better jobs. |
| C. | At equilibrium wages only minimally qualified workers apply for the job |
| D. | At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy |
| E. | All of these answers |
| Answer» F. | |
| 13. |
Which of the following government policies would fail to lower the unemployment rate ? |
| A. | Establishing worker training Programs |
| B. | Establishing right-to-work laws |
| C. | Reducing unemployment benefits |
| D. | Establishing employment agencies |
| E. | Raising the minimum wage |
| Answer» F. | |
| 14. |
Which of the following firms is most likely to spend a large percentage of their revenue on advertising ? |
| A. | the producer of a highly differentiated consumer product |
| B. | the manufacturer of an undifferentiated consumer commodity |
| C. | a perfect competitor |
| D. | The manufacturer of an industrial product |
| E. | The producer of a low-quality product that costs the same to produce as a similar high-quality product |
| Answer» B. the manufacturer of an undifferentiated consumer commodity | |
| 15. |
Which of the following firms has the least incentive to advertise ? |
| A. | a manual fracture of breakfast cereal |
| B. | a wholesaler of crude oil |
| C. | a restaurant |
| D. | a manufacturer of home heating and air conditioning |
| Answer» C. a restaurant | |
| 16. |
When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality then ? |
| A. | there are too many firms in the market and market efficiency could be increased if firms exited the market |
| B. | the number of firms in the market is optimal and the market is efficient |
| C. | There are too few firms in the market and market efficiency could be be increased with additional entry |
| D. | The only way to improve efficiency in this market is for the government to regulate it like a natural monopoly. |
| Answer» B. the number of firms in the market is optimal and the market is efficient | |
| 17. |
Unions tend to increase the disparity in pay between insiders and outsiders by ? |
| A. | increasing the wage in the Unionized sector, Which may create a decrease in the supply of workers in the non-unionized sector |
| B. | Increasing the demand for workers in the Unionized sector |
| C. | decreasing the demand for workers in the Unionized sector |
| D. | Increasing the wage in the Unionized sector which may create an increase in the supply of workers in the non-unionized sector |
| Answer» E. | |
| 18. |
Union might increase efficiency in the case Where they ? |
| A. | Raise the wage for insiders above the competitive equilibrium |
| B. | Lower the wage of local outsiders |
| C. | Offset the market power of a large firm that is the dominant employer in a region |
| D. | Threaten a strike but don’t actually follow through so there are not lost hours of work |
| Answer» D. Threaten a strike but don’t actually follow through so there are not lost hours of work | |
| 19. |
TO reduce cyclical unemployment the government might ? |
| A. | Increase the budget surplus |
| B. | Increase the balance of payment deficit |
| C. | Reduce interest rates |
| D. | Reduce government expenditure |
| Answer» E. | |
| 20. |
The use of word “competition” in the name of the market structure called “monopolistic competition” refers to the fact that ? |
| A. | there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market |
| B. | Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms. |
| C. | Monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms. |
| D. | The products are differentiated in a monopolistically competitive market just like in a competitive market. |
| Answer» B. Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms. | |
| 21. |
The use of the word “monopoly” in the name of the market structure called “monopolistic competition” refers to the fact that ? |
| A. | monopolistically competitive firms charge prices equal to their marginal costs just like monopolists |
| B. | a monopolistically competitive firms faces a downward-sloping demand curve for its differentiated product and so does a monopolist |
| C. | monopolistically competitive markets have free entry and exit just like a monopolistic market |
| D. | monopolistically competitive firms produce beyond their efficient scale and so do monopolists |
| Answer» C. monopolistically competitive markets have free entry and exit just like a monopolistic market | |
| 22. |
The natural rate of unemployment is likely to fall if ? |
| A. | unemployment benefits increase |
| B. | Income tax increases |
| C. | More training is available for the unemployed |
| D. | Geographical immobility increases |
| Answer» B. Income tax increases | |
| 23. |
The Marginal Revenue Product is ? |
| A. | Upward sloping due to the law of demand |
| B. | Upward sloping due to the law of marginal utility |
| C. | Downward sloping due to the law of diminishing returns |
| D. | Downward sloping due to the law of supply |
| Answer» B. Upward sloping due to the law of marginal utility | |
| 24. |
The Marginal Revenue Product is likely to be wage inelastic if ? |
| A. | Labour costs are a high percentage of total costs |
| B. | Demand for the final product is price inelastic |
| C. | It is relatively easy to substitute capital for labour |
| D. | There are many substitutes for the final product |
| Answer» E. | |
| 25. |
The amount of unemployment that the economy normally experiences is known as ? |
| A. | The natural rate of unemployment |
| B. | cyclical unemployment |
| C. | efficiency wage unemployment |
| D. | frictional unemployment |
| Answer» B. cyclical unemployment | |
| 26. |
Refer to Figure 1. The unemployment rate is ? |
| A. | 3.2 Percent |
| B. | 5.7 Percent |
| C. | 5.8 Percent |
| D. | Not Enough |
| Answer» D. Not Enough | |
| 27. |
Refer to Figure 1 The labour fouce is ? |
| A. | 134.0 million |
| B. | None of theses answers |
| C. | 92.3 million |
| D. | 98.0 million |
| Answer» E. | |
| 28. |
Refer to Figure 1. The labour force participation rate is ? |
| A. | 47.1 Percent |
| B. | 65.9 Percent |
| C. | 50.2 Percent |
| D. | 70.2 Percent |
| Answer» E. | |
| 29. |
Reducing involuntary unemployment ? |
| A. | Helps the economy move on the to Production Possibility Frontier |
| B. | Helps shift the economy’s Production Possibility Frontier outwards |
| C. | Helps the economy move along its Production Possibility Frontier |
| D. | Helps the economy move inside the Production Possibility Frontier |
| Answer» B. Helps shift the economy’s Production Possibility Frontier outwards | |
| 30. |
One source of inefficiency in monopolistic competition is that since price is above marginal cost, some units are not produced that buyers value in ? |
| A. | Since price is above marginal cost surplus is redistributed from buyers to sellers |
| B. | monopolistically competitive firms earn economic profits in the long run |
| C. | monopolistically competitive firms produce beyond their efficient scale |
| D. | excess of the cost of production and this causes a deadweight loss. |
| Answer» E. | |
| 31. |
Occupational immobility of labour occurs if ? |
| A. | People lack information |
| B. | People do not want to work |
| C. | People do not have the right skills to work |
| D. | People cannot afford to move location |
| Answer» D. People cannot afford to move location | |
| 32. |
Less demand in the economy may increase unemployment; this may lead to less spending which may reduce demand further. This is called ? |
| A. | The upward accelerator |
| B. | The downward multiplier |
| C. | The upward PPF |
| D. | The downward mpc |
| Answer» C. The upward PPF | |
| 33. |
In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes ? |
| A. | losses and firms exit the market |
| B. | profits and firms exit the market |
| C. | losses and firms enter the market |
| D. | profits and firms enter the market |
| Answer» E. | |
| 34. |
In a perfectly competitive labour market firms are wage takers and the marginal cost of labour equals? |
| A. | The average cost of labour |
| B. | The marginal product |
| C. | The marginal revenue |
| D. | The total cost of labour |
| Answer» E. | |
| 35. |
IF Unemployment insurance were so generous that it paid laid off workers 95 percent of their regular salary ? |
| A. | Frictional Unemployment would fall |
| B. | The official unemployment rate would probably understate true unemployment |
| C. | The official unemployment rate would probably overstate true unemployment |
| D. | There would be no impact on the official unemployment rate |
| E. | None of these answers |
| Answer» D. There would be no impact on the official unemployment rate | |
| 36. |
If there is cyclical unemployment in the economy the government might ? |
| A. | Increase interest rates |
| B. | Encourage savings |
| C. | Cut taxes |
| D. | Reduce government spending |
| Answer» C. Cut taxes | |
| 37. |
If the real wage is too high in the labour market ? |
| A. | The quantity demanded of labour is higher than the quantity supplied |
| B. | The quantity demanded of labour equals the quantity supplied |
| C. | The quantity demanded of labour is lower than the quantity supplied |
| D. | It will automatically adjust in the short run to bring equilibrium |
| Answer» C. The quantity demanded of labour is lower than the quantity supplied | |
| 38. |
If the minimum wage is set above the equilibrium wage rate, then another thing unchanged ? |
| A. | There will be equilibrium in the labour market |
| B. | There will excess demand in the labour market |
| C. | There will be excess supply in the labour market |
| D. | More people will be employed |
| Answer» B. There will excess demand in the labour market | |
| 39. |
If people are made unemployed because of a fall in aggregate demand this is known as ? |
| A. | Frictional unemployment |
| B. | Seasonal unemployment |
| C. | Cyclical unemployment |
| D. | Structural unemployment |
| Answer» C. Cyclical unemployment | |
| 40. |
If, for any reason the wage is held above the competitive equilibrium wage? |
| A. | The quantity of labour supplied will exceed the quantity of labour demanded and there will be Unemployment |
| B. | Unions will likely Strike and the wage will fall to equilibrium |
| C. | The quantity of labour demanded will exceed the quantity of labour supplied and there will be a labour shortage |
| D. | The quality of workers in the applicant pool will tend to fall |
| Answer» B. Unions will likely Strike and the wage will fall to equilibrium | |
| 41. |
If employees cannot accept a job because of the costs of moving this is known as ? |
| A. | Occupational immobility |
| B. | Cyclical unemployment |
| C. | Structural immobility |
| D. | Geographical immobility |
| Answer» C. Structural immobility | |
| 42. |
Demand for labour is more likely to be wage inelastic if ? |
| A. | Wages are a small proportion of total costs |
| B. | Demand for the final product is price elastic |
| C. | It is easy to replace labour |
| D. | Capital is a good substitute for labour |
| Answer» B. Demand for the final product is price elastic | |
| 43. |
Defenders of the use of brand names argue that brand names ? |
| A. | all of these answers |
| B. | are useful even in socialist economics such as the former Soviet Union |
| C. | provide information about the quality of the product |
| D. | give firms incentive to maintain high quality |
| Answer» B. are useful even in socialist economics such as the former Soviet Union | |
| 44. |
An increase in the wage rate ? |
| A. | Will usually lead to more people employed |
| B. | Will decrease total earning if the demand for labour is wage elastic |
| C. | is illegal in a free market |
| D. | will cause a shift in the demand for labour |
| Answer» E. | |
| 45. |
According to the Office of National Statistics UK, a husband who chooses to stay home and take care of household is ? |
| A. | Employed |
| B. | Not in the labour force |
| C. | A discouraged worker |
| D. | Unemployed |
| Answer» C. A discouraged worker | |
| 46. |
A reservation wage is the ? |
| A. | Maximum wage the firm is willing to pay |
| B. | tip necessary to get a waiter to reserve a table |
| C. | minimum wage the worker is willing to accept |
| D. | competitive equilibrium wage. |
| Answer» D. competitive equilibrium wage. | |
| 47. |
A profit maximising firm will employ labour up to the point where ? |
| A. | Marginal revenue = marginal product |
| B. | Marginal cost = marginal product |
| C. | Marginal revenue product = average cost of labour |
| D. | Marginal revenue product = marginal cost of labour |
| Answer» C. Marginal revenue product = average cost of labour | |
| 48. |
A minimum wage law tends to ? |
| A. | Help all teenagers because they receive a higher wage than they would otherwise |
| B. | have no impact on unemployment as long as it is set above the competitive equilibrium wage |
| C. | Create more Unemployment is high-skill job markets than in low-skill job markets |
| D. | Create more unemployment in low-skill job markets than in high-skill job markets |
| Answer» E. | |
| 49. |
A miner who has been unable to find work for so long that he has stopped looking for work is considered to be ? |
| A. | Not in the labour force |
| B. | Not in the adult population |
| C. | Unemployed |
| D. | Employed |
| Answer» B. Not in the adult population | |
| 50. |
A fall in demand for labour is likely to lead to ? |
| A. | A lower equilibrium wage and lower quantity of labour |
| B. | A lower equilibrium wage and higher quantity of labour |
| C. | A higher equilibrium wage and higher quantity of labour |
| D. | A higher equilibrium wage and lower quantity of labour |
| Answer» C. A higher equilibrium wage and higher quantity of labour | |