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 131 of 202
- A. Working the night shift
- B. working harder
- C. more education
- D. having a greater amount of natural ability
- E. doing a job that is fun
Explanation: A fun job provides a non-monetary benefit, so workers may accept a lower wage for it.
Correct answer: doing a job that is fun- A. education
- B. experience
- C. all of these answers are parts of a worker's human capital
- D. effort
- E. on the job training
Explanation: Education, experience and on-the-job training are stocks of knowledge and skills that form human capital.
Correct answer: effort- A. coal miners must have greater human capital than others
- B. we have observed a compensating differential
- C. coal miners must be more attractive than other workers
- D. we have evidence of discrimination against workers outside the coal mine
Explanation: Extra pay for an unpleasant or risky job is a compensating differential, which compensates workers for accepting worse working conditions.
Correct answer: we have observed a compensating differential- A. will be perfectly inelastic in the long run. but upward sloping in the short run
- B. is perfectly inelastic since there is a fixed amount of land
- C. is perfectly elastic since there is fixed amount of land
- D. will be upward sloping because as land becomes more valuable in once use, the amount of land made available for that use will increase
Explanation: Although the total amount of land is fixed, land can be shifted between uses.
Correct answer: will be upward sloping because as land becomes more valuable in once use, the amount of land made available for that use will increase- A. training investment
- B. skill capital
- C. skill-building investment
- D. human capital
Explanation: Human capital is the accumulated stock of education, skills, training, knowledge and abilities embodied in people.
Correct answer: human capital- A. encourage people to quit their jobs
- B. reduce the cost of job search
- C. enable people to quit searching for work
- D. reduce the benefits of additional job searching
Explanation: Benefits can reduce the financial pressure to accept the first available job, allowing workers to search longer and raising the measured…
Correct answer: reduce the cost of job search- A. total variable cost curve
- B. marginal cost curve
- C. total product of labour curve
- D. marginal product of labour curve
Explanation: With a constant output price, marginal revenue product equals the output price multiplied by the marginal product of labour.
Correct answer: marginal product of labour curve- A. the demand curve for accountants to shift to the right, since the productivity of accountants has increased
- B. firms to move up their demand curves for accountants
- C. the demand curve for accountants to shift to the left, since it requires fewer accountants than it did before to do the same amount of work.
- D. firms to move down their demand curves for accountants
Explanation: Higher accountant productivity increases the revenue produced by each accountant, so firms demand more accountants at each wage.
Correct answer: the demand curve for accountants to shift to the right, since the productivity of accountants has increased- A. remains constant
- B. increases since the cost of forgoing one hour of work increases
- C. decreases since the customer now has more income to spend
- D. may increase of decrease depending on the individual's preferences.
Explanation: One hour of leisure means giving up one hour of wages, so a higher wage raises the opportunity cost of leisure.
Correct answer: increases since the cost of forgoing one hour of work increases- A. income effect is zero
- B. substitution effect outweighs the income effect
- C. income effect outweighs the substitution effect
- D. income effect and the substitution effects are equal
Explanation: A backward-bending labour-supply curve means that a wage increase reduces hours worked.
Correct answer: income effect outweighs the substitution effect- A. will have no effect on labour supply
- B. will decreases labour supply
- C. could cause either an increases or a decrease in labour supply
- D. will increase labour supply.
Explanation: A higher wage makes leisure more expensive, creating a substitution effect toward work, but it also raises real income and demand for…
Correct answer: will decreases labour supply- A. making spending decision but not labour-supply decision.
- B. making both spending and labour-supply decisions
- C. considered to be 'poor' but not for those who are considered to be 'rich'
- D. making labour-supply decisions but not spending decisions.
Explanation: Households face limited income, time, and resources in both decisions: they choose a bundle of goods within a budget and allocate…
Correct answer: making both spending and labour-supply decisions2613. An increase in the minimum wage will cause a relatively large increase in unemployment among ?
- A. unskilled workers if the demand for labour is relatively inelastic
- B. unskilled workers if the demand for labour is relatively elastic
- C. skilled workers if the demand for labour is relatively elastic
- D. skilled workers if the demand for labour is relatively inelastic
Explanation: When labour demand is elastic, employers reduce employment substantially after the wage rises.
Correct answer: unskilled workers if the demand for labour is relatively elastic- A. the return to any factor of production that is in fixed supply
- B. the profit earned by the owner of any housing unit.
- C. the amount paid each year by a tenant for an apartment
- D. any profit earned by stockholders when they sell their stock
Explanation: Economic rent is the payment to a factor whose supply is fixed or highly inelastic, such as land.
Correct answer: the return to any factor of production that is in fixed supply- A. the Rs500 weekly salary that he has forgone to search for another job
- B. The Rs500 weekly salary that he has forgone and the monetary costs incurred by continuing to search
- C. Rs difference between the weekly salary he finally accepts and the Rs500 weekly salary that he has forgone
- D. Rs0, since he is currently unemployed
Explanation: The opportunity cost of continuing the search includes the Rs500 weekly wage forgone plus any monetary expenses of searching.
Correct answer: The Rs500 weekly salary that he has forgone and the monetary costs incurred by continuing to search- A. occupational differentials
- B. search differentials
- C. job differentials.
- D. compensating differentials
Explanation: Compensating differentials are wage differences that offset better or worse job characteristics, such as risk, unpleasant conditions, or…
Correct answer: compensating differentials- A. reduce the supply of labour.
- B. increase the demand for labour
- C. increase the supply of labour
- D. have no effect on the supply of labour
Explanation: A higher wage makes leisure more costly in terms of forgone earnings, creating a substitution effect toward work.
Correct answer: increase the supply of labour- A. leisure becomes less expensive and households buy more of it
- B. leisure becomes more expensive and households buy more of it
- C. leisure becomes more expensive and households buy less of it
- D. leisure becomes less expensive and households buy less of it.
Explanation: When wages rise, each hour of leisure means giving up more earnings, so leisure becomes more expensive.
Correct answer: leisure becomes more expensive and households buy less of it- A. output demand
- B. indirect demand
- C. derived demand
- D. the value of the marginal product of auto workers.
Explanation: The demand for labour used to produce cars depends on consumers' demand for cars.
Correct answer: derived demand- A. transitory income is a good measure of the distribution of living standards
- B. none of these answers
- C. permanent income is a good measure of the distribution of living standards.
- D. life-cycle income is a good measure of the distribution of living standards.
- E. current annual income is a good measure of the distribution of living standards.
Explanation: With perfect borrowing and lending, people can convert income received at different ages into a smooth lifetime consumption path.
Correct answer: permanent income is a good measure of the distribution of living standards.