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 132 of 202
- A. increase a worker's current income and permanent income
- B. reduce a worker's current income but not necessarily their permanent income
- C. affect neither the current nor the permanent income of a worker
- D. reduce a worker's permanent income but not their current income
Explanation: A recession directly lowers earnings during the unemployment period, so current income falls.
Correct answer: reduce a worker's current income but not necessarily their permanent income- A. impoverished countries to impoverished countries
- B. impoverished countries to wealthy countries
- C. wealthy countries to wealthy countries
- D. wealthy countries to impoverished countries
Explanation: Guest-worker schemes generally move labor temporarily from countries with lower wages and fewer job opportunities to countries offering…
Correct answer: impoverished countries to wealthy countries- A. electrician unions in the high-paying nations
- B. electrician unions in the low paying nations
- C. electrician employers in the high-paying nations
- D. electricians who stay in the low paying nations
Explanation: Electricians entering a high-wage country increase the available labor supply and may put downward pressure on existing electricians’…
Correct answer: electrician unions in the high-paying nations- A. decrease wage rates in the low-paying nations
- B. decrease productivity and real output in the world
- C. increase business or capitalist incomes in the high-paying nations
- D. increase business or capitalist incomes in the low-paying nations
Explanation: Migration into high-wage countries expands labor supply there, which can reduce wages while increasing the return to complementary capital…
Correct answer: increase business or capitalist incomes in the high-paying nations- A. adds to the pre-existing productive capacity
- B. enters markets neither parent could have entered individually
- C. yields cost reductions unavailable to parent firms
- D. gives rise to increased amounts of market power
Explanation: A joint venture can create welfare losses when it increases market power, allowing the new firm to restrict output and charge prices above…
Correct answer: gives rise to increased amounts of market power- A. enjoy unfair advantage in taxation
- B. export jobs by shifting technology overseas
- C. export jobs by shifting investment overseas
- D. operating at output levels where scale economies occur
Explanation: U.S. labor unions commonly accuse multinationals of gaining tax advantages and moving jobs, technology, or investment abroad.
Correct answer: operating at output levels where scale economies occur- A. cannot benefit from the advantage of comparative advantage
- B. may raise political problems in countries where their subsidiaries operate
- C. can only invest at home but not overseas
- D. can only invest overseas but not at home
Explanation: Multinational subsidiaries can affect host-country policy, employment, taxation, and control of strategic industries, creating political…
Correct answer: may raise political problems in countries where their subsidiaries operate- A. increase the transfer of technology between nations
- B. make it harder to nations to foster activities of comparative advantage
- C. always enjoy political harmony in nations where their subsidiaries operate
- D. require governmental subsidies in order to conduct worldwide operations
Explanation: Multinational corporations transmit technology, management methods, and production know-how across borders through investment and…
Correct answer: increase the transfer of technology between nations- A. sharing research and development cost among corporations
- B. forestalling protectionism against imports
- C. establishing work rules promoting higher labor productivity
- D. operating at diseconomy-of-scale output levels
Explanation: Joint ventures can share research costs, reduce resistance to foreign imports, and improve labor practices or productivity.
Correct answer: operating at diseconomy-of-scale output levels- A. the construction of a new auto assembly plant overseas
- B. the acquisition of an existing steel mill overseas
- C. the purchase of bonds or stock issued by a textile company overseas
- D. the creation of a wholly owned business firm overseas
Explanation: Buying overseas bonds or shares is generally foreign portfolio investment, because it does not necessarily give the investor managerial…
Correct answer: the purchase of bonds or stock issued by a textile company overseas- A. marginal cost pricing
- B. full cost pricing
- C. price discrimination
- D. transfer pricing
Explanation: Transfer pricing is the price charged for goods, services, or inputs exchanged between related companies within the same multinational…
Correct answer: transfer pricing- A. multinational corporation
- B. international joint venture
- C. horizontal merger
- D. vertical merger
Explanation: An international joint venture is a newly created business owned by two or more companies, often formed for a particular project or a…
Correct answer: international joint venture- A. exporting American jobs by investing overseas
- B. exporting American jobs by keeping investment in the U.S
- C. importing cheap foreign workers by shifting U.S investment overseas
- D. importing cheap foreign workers by keeping U.S investment at home
Explanation: Labor unions commonly argue that overseas investment shifts production abroad and therefore exports jobs that might otherwise be available…
Correct answer: exporting American jobs by investing overseas- A. hire low-income workers
- B. manufacture in nations they have difficult exporting to
- C. obtain necessary factor inputs
- D. All of the above
Explanation: Multinational operations can reduce labor costs, overcome barriers to exporting by producing inside a target market, and secure scarce or…
Correct answer: All of the above- A. total wage income in the world
- B. wage disparities
- C. business or capitalist income in the world
- D. the productivity of labor
Explanation: Migration from low-wage to high-wage countries increases labor supply in the destination and reduces it in the origin, tending to narrow…
Correct answer: wage disparities- A. R&D generating welfare improved technology
- B. development of more productive machinery
- C. new work rules promoting workers efficiency
- D. lower wages extracted from workers
Explanation: Lower wages are mainly a transfer from workers to the firm, not a genuine reduction in resource use or an efficiency gain for the whole…
Correct answer: lower wages extracted from workers- A. excludable
- B. a common resource
- C. a public goods
- D. rival
Explanation: A good is excludable when access can be denied to people who do not pay or otherwise qualify.
Correct answer: excludable- A. a firework displays
- B. national defense
- C. iron one
- D. a national park
Explanation: A common resource is rival but difficult to exclude people from using. A national park can become congested or depleted through use, while…
Correct answer: a national park- A. an excludable good.
- B. a private good
- C. a common resource
- D. a public good.
Explanation: A negative externality imposes an outside cost and leads to overuse of a resource, much like the depletion of a common resource in the…
Correct answer: a common resource- A. rival good
- B. public good
- C. private good
- D. common resource
Explanation: A positive externality creates benefits for people who are not directly involved in the transaction, resembling the spillover benefits of…
Correct answer: public good