All Free Economics MCQs with Answers

• A. common; different parts of the firm
• B. common; mangers
• C. conflicting; managers
• D. conflicting; different parts of the firm

Explanation: Behavioral theories view the firm as a coalition whose departments and groups may pursue conflicting interests, such as sales, production…

• A. growth.
• B. sales revenue
• C. managers utility
• D. profits.

Explanation: The threat of takeover disciplines managers because poor performance can reduce the firm’s value and invite acquisition.

• A. horizontal
• B. vertical
• C. conglomerate
• D. homogeneous

Explanation: A conglomerate merger combines firms operating in unrelated industries, such as clothing and software.

• A. sales revenue maximization
• B. maximization the growth of sales revenue.
• C. Sales maximization
• D. long-run profit maximization.

Explanation: Growth maximisation means maximising the rate at which the firm expands, commonly measured through the growth of sales revenue.

• A. AR minus AC is maximized
• B. MC = MR
• C. quantity sold is maximized
• D. sales revenue is maximized

Explanation: A sales-revenue-maximising firm chooses the output at which total sales revenue is greatest, rather than where profit is greatest.

• A. profit myopia
• B. principal-agent problem.
• C. merger mania.
• D. moral hazard

Explanation: When ownership is separated from control, shareholders as principals must rely on managers as agents, creating the principal-agent…

• A. respect of other managers.
• B. maximum profits.
• C. job security
• D. a large number of subordinates

Explanation: Williamson’s managerial utility model allows managers to pursue objectives such as status, job security and more subordinates instead of…

• A. does not know its MC and MR
• B. has too much information
• C. has too little information
• D. The first and third option

Explanation: A firm may fail to maximise profit when it lacks information about its marginal cost and marginal revenue, or more generally has too…

• A. sole proprietors
• B. partnerships
• C. public limited companies
• D. monopolies

Explanation: In a public limited company, numerous shareholders own the firm while professional managers control its daily operations.

• A. they are afraid of encouraging takeovers.
• B. shareholders have little control over managers.
• C. shareholders want higher dividends.
• D. both the first and third option.

Explanation: Managers of public companies may pursue growth, security, or personal objectives because dispersed shareholders cannot closely control…

• A. firms do not know how to maximize profits.
• B. firms have other aims
• C. it does not explain monopolistic competition
• D. Both the first and second option

Explanation: The traditional model assumes firms know their profit-maximizing choices and pursue profit as their sole objective, but real firms may…

• 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

Explanation: Oil prices affect the costs and output decisions of car producers, an industry-level relationship studied in microeconomics.

• A. Macroeconomic
• B. Microeconomics
• C. statements of description that can be tested
• D. Statements of prescription that involve value judgments.Economics

Explanation: Positive economics describes what is and makes claims that can be checked against evidence.

• A. an advance in technology
• B. an increase in the labor force
• C. an increase in the capital stock
• D. a reduction in unemployment

Explanation: A reduction in unemployment uses existing resources more fully and moves the economy toward its existing frontier, but does not expand…

• 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

Explanation: Microeconomics studies individual consumers, firms, and industries, including very large industries; size alone does not make an issue…

• 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.

Explanation: Statement (a) is positive because it predicts a cause-and-effect relationship that can be tested with evidence.

• A. a shift in the production possibilities frontier outward.
• B. a movement from inside the curve toward the curve.
• C. a shift in the production possibilities frontier inward
• D. a movement along a production possibilities frontier toward capital goods.

Explanation: Economic growth expands an economy’s productive capacity, represented by an outward shift of the production possibilities frontier.

• A. inefficient
• B. normative
• C. unattainable
• D. efficient

Explanation: Every point on the production possibilities frontier represents productive efficiency because available resources are fully and…

• A. labor
• B. land
• C. money
• D. capital

Explanation: The standard factors of production are land, labor, capital, and entrepreneurship.

• 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

Explanation: A university economist is most likely to conduct independent research using systematic data and testable methods.