All Free Economics MCQs with Answers
Every Economics question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
4,037 questions · page 122 of 202
- A. average total cost is falling
- B. average total cost is raising
- C. average total cost is maximized
- D. average total cost is minimized
Explanation: Marginal cost intersects average total cost at its minimum: below that point, marginal cost pulls average cost down, and above it…
Correct answer: average total cost is minimized- 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
Explanation: Factory labour wages usually vary with the quantity produced or hours worked, making them a variable cost in the short run.
Correct answer: wages paid to factory labor- A. is liner (a straight line)
- B. could be any of these answers
- C. becomes steeper as the quantity of output increases
- D. become flatter as the quantity of output increases.
Explanation: Diminishing marginal product means each additional input produces less extra output, so producing additional units requires increasingly…
Correct answer: becomes steeper as the quantity of output increases- 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
Explanation: Accounting profit subtracts only explicit monetary costs, whereas economic profit also subtracts implicit opportunity costs.
Correct answer: accounting profit will exceed economic profit- A. Rs30,000
- B. Rs35,000
- C. Rs75,000
- D. Rs70,000
Explanation: Accounting profit subtracts explicit costs only: Rs20,000 for materials and Rs5,000 interest on borrowed funds.
Correct answer: Rs75,000- A. implicit costs
- B. variable costs
- C. the sum of implicit and explicit costs.
- D. explicit costs.
- E. marginal costs
Explanation: Accounting profit records actual monetary payments made by the firm, called explicit costs.
Correct answer: explicit costs.- A. Eu consumers who buy electronics from Japan
- B. EU farmers who export grain
- C. employees of EU car manufacturers
- D. Shareholders of German carmaker BMW
Explanation: A quota on Japanese cars can protect EU car producers and raise their employees’ and shareholders’ returns, while cheaper foreign currency…
Correct answer: EU farmers who export grain- A. a natural monopoly
- B. an LDC's limit of one firm to an industry
- C. an individual firm facing a horizontal (perfectly elastic) demand curve in LDCs
- D. The existence of oligopoly
Explanation: A natural monopoly occurs when economies of scale make average cost fall over the relevant market range, so one large firm can supply the…
Correct answer: a natural monopoly- A. mobile phone
- B. electricity
- C. water supply
- D. postal service
Explanation: Mobile-phone service can generally be supplied by competing firms, so it is not normally classified as a natural monopoly.
Correct answer: mobile phone- A. 800
- B. 40,000
- C. more than zero but less than 800
- D. less than zero
Explanation: Discounting makes each future $200 payment worth less than $200 today, although every payment remains positive.
Correct answer: more than zero but less than 800- A. wage costs per unit of output
- B. wage rate that prevails in LDCs
- C. Wage rate divided by the productivity of labor
- D. marginal product of labor divided by wage
Explanation: The efficiency wage is measured as the wage cost per unit of effective labour or output, expressed here as the wage rate divided by labour…
Correct answer: Wage rate divided by the productivity of labor2432. Economic rent ?
- A. is productive activity to obtain private benefit from public action and resources
- B. are the payments above the minimum essential to attract the resources to the market?
- C. is the wage used to pay unskilled workers?
- D. does not include monopoly profits
Explanation: Economic rent is the payment to a factor of production above the minimum required to keep it in its present use.
Correct answer: are the payments above the minimum essential to attract the resources to the market?- A. stay the same
- B. rotate inward
- C. shift outward in a parallel fashion
- D. rotates outward
- E. shift inward in parallel fashion
Explanation: Doubling income doubles both budget intercepts, while doubling both prices halves each intercept.
Correct answer: stay the same- A. a substitute good
- B. a normal good
- C. a complementary good
- D. an inferior good
Explanation: An inferior good has a negative income effect: when income rises, consumers buy less of it.
Correct answer: an inferior good- A. rises
- B. stays the same
- C. could rise or fall depending on the relative prices of the two goods.
- D. falls
Explanation: A bowed-inward, or convex, indifference curve reflects diminishing marginal willingness to substitute one good for the other.
Correct answer: rises- A. the budget constraint crosses the indifference curve
- B. the two highest indifference curves cross
- C. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
- D. the consumer has reached the highest indifference curve
Explanation: The consumer chooses the highest indifference curve that can still be reached with the available income.
Correct answer: the consumer reaches the highest indifference curve subject to remaining on the budget constraint- A. the marginal rate of substitution
- B. the marginal rate of trade-off.
- C. the trade-off rates
- D. the marginal rate of indifference
Explanation: The slope of an indifference curve measures how much of one good the consumer is willing to give up for another while maintaining the same…
Correct answer: the marginal rate of substitution2438. Which of the following is not true regarding the outcome of a consumer's optimization process ?
- A. The marginal utility per dollar spent on each good is the same
- B. The marginal rate of substitution between goods is equal to the ratio of the prices between goods
- C. The consumer's indifference curve is tangent to his budget constraint
- D. The consumer has reached his highest indifference curve subject to his budget constraint
- E. The consumer is indifferent between any two points on his budget constraint
Explanation: Points on the same indifference curve provide equal utility, but different points on a budget line generally lie on different indifference…
Correct answer: The consumer is indifferent between any two points on his budget constraint- A. right shoes and left shoes
- B. petrol from BP and petrol from shell
- C. kit-Kat chocolate snacks and Twix chocolate snacks
- D. coke and Pepsi
Explanation: Right and left shoes are strong complements because one has little use without the other.
Correct answer: right shoes and left shoes- A. will always increase the quantity of labor supplied
- B. will increase the amount of labor supplied if the substitution effect outweighs the income effect
- C. will increase the amount of labor supplied if the income effect outweighs the substitution effect
- D. will always decrease the amount of labor supplied
Explanation: A higher wage makes work more attractive relative to leisure, creating a substitution effect that raises labour supplied, but the higher…
Correct answer: will increase the amount of labor supplied if the substitution effect outweighs the income effect