All Free Economics MCQs with Answers

• A. employees
• B. the population
• C. the factors of production
• D. the working population

Explanation: Functional distribution classifies income according to the factor that earns it, such as wages to labour, rent to land, interest to…

• A. housing gets priority
• B. industry gets priority
• C. farming gets priority
• D. the equilibrium rental rate equilibrium total demand with supply

Explanation: Land moves toward uses offering the highest return until the rental rate balances total demand with the available supply.

• A. variable, technology
• B. fixed, expectations
• C. fixed, rental rate of capital
• D. variable, interest rates

Explanation: In the short run, the existing capital stock is fixed, while in the long run firms can adjust it according to the rental rate they must…

• A. change in a company's balance sheet when it acquires new plant
• B. additional value of output from using more capital
• C. change in company's share price
• D. changing value of the capital stock

Explanation: The marginal revenue product of capital is the extra revenue generated by employing one additional unit of capital, usually found by…

• A. wage rate of capital
• B. interest charges
• C. marginal capital cost
• D. rental rate for capital

Explanation: The rental rate of capital is the opportunity cost paid for using capital services during a period.

• A. low wages, employment
• B. high wages, labor supply
• C. high wages, productivity
• D. high wages, employment

Explanation: Efficiency wages are deliberately high wages paid to encourage effort, reduce shirking and attract or retain productive workers.

• A. they tend to work in relatively unskilled jobs
• B. educational disadvantage
• C. firms are reluctant to invest in training
• D. all of the above

Explanation: Lower average incomes can reflect concentration in less-skilled jobs, educational disadvantages and employers' weaker incentives to…

• A. regional variation
• B. unionization
• C. relative danger
• D. skills

Explanation: Differences in skills and human capital are generally the most important systematic source of wage differentials because more productive…

• A. inelastic the demand for labour, they can restrict the supply of labour
• B. members they have, aggressive they behave
• C. the economy is growing, people prefer leisure
• D. the productivity is growing vacancies exist

Explanation: A union can raise wages more successfully when employers cannot easily reduce labour demand and when the union can restrict the supply of…

• A. course fees
• B. course fees and living expenses
• C. the earnings foregone
• D. Course fees living expenses and textbook

Explanation: The opportunity cost of education is the income a person gives up while studying instead of working.

• A. the tools used by workers to enhance productivity
• B. a person inherited ability
• C. the stock of expertise accumulated by a worker
• D. education

Explanation: Human capital is the accumulated stock of knowledge, skills, training, and expertise embodied in a worker.

• A. higher real wages
• B. lower fixed costs of working
• C. lower non-labour income
• D. changes in tastes between leisure and work
• E. all of the above

Explanation: Labour-force participation responds to the reward from working, the costs of working, non-labour income, and preferences between work and…

• A. Supply of labor
• B. Short-run demand curve for labor
• C. marginal cost of labour
• D. marginal revenue product of labor

Explanation: With the product price held constant, a firm's marginal revenue product of labour is proportional to the marginal physical product and…

• A. One employee is more attractive than another
• B. One employee is more educated than another
• C. All of these answers generated
• D. One employee works harder than another
• E. One employee is willing to work the nightshift while another is not.

Explanation: A compensating differential is extra pay for an undesirable job characteristic, such as night work.

• A. different preferences for the type of work they are willing to do
• B. different levels of job experience
• C. all of these answers are correct
• D. different levels of education

Explanation: Wage differences can reflect differences in preferences, experience, or education rather than discrimination.

• A. The existence of a wage differential among groups is strong evidence of discrimination in the labour market
• B. Discrimination can only persist in a competitive labour market it customers are willing to pay to maintain the discriminatory practice or the government requires discrimination
• C. Bigoted employers are the main source of a persistent discriminatory wage differential in a competitive market
• D. Discrimination cannot exist in a competitive labor market

Explanation: In a competitive market, discriminatory employers generally face higher costs and can be undercut, so discrimination may persist only when…

• A. productivity
• B. age
• C. sex
• D. race

Explanation: Different treatment based only on productivity is an economic distinction rather than discrimination in the usual labour-market sense.

• A. decrease in the demand for unskilled workers because of increases in technology and increases in international trade
• B. increase in the number of unskilled workers available due to immigration into the UK.
• C. decrease in the demand for unskilled workers are more poorly educated
• D. increase in the number of unskilled workers available because workers are more poorly educated

Explanation: Skill-biased technological change and international trade can reduce demand for unskilled labour relative to skilled labour, widening the…

• A. women obtaining less human capital because they don't plan to work continuously to the age of retirement
• B. Women entering and leaving the labour force to care for children
• C. customers preferring to deal with men
• D. women preferring to work in pleasant clean safe work places
• E. all of these answers

Explanation: Each listed factor can reduce women's wages: interrupted careers may reduce human capital, customer bias can reduce demand for female…

• A. All of these answers could be source of a persistent discriminatory wage differential
• B. the customer
• C. the government
• D. the employer

Explanation: In a competitive market, employer discrimination is least likely to persist because firms that refuse equally productive workers would…