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 135 of 202
- A. There is an increase in the quantity demanded of apples and in the supply for apples
- B. There is an increase in the demand and supply of apples.
- C. There is an increase in the demand for apples and a decrease in the supply of apples
- D. There is a decrease in the quantity demanded of apples and an increase in the supply for apples
- E. There is an increase in the demand for apples and an increase in the quantity supplied of apples.
Explanation: A shift in tastes toward apples shifts the demand curve rightward. The resulting higher equilibrium price causes an increase in quantity…
Correct answer: There is an increase in the demand for apples and an increase in the quantity supplied of apples.2682. Which of the following statements is true about the impact of an increase in the price of lettuce ?
- A. Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall
- B. The supply of lettuce will decrease
- C. The demand for lettuce will decrease
- D. The equilibrium price and quantity of salad dressing will fall
- E. The equilibrium price and quantity of salad dressing will rise
Explanation: Lettuce and salad dressing are complementary goods, so a higher lettuce price reduces demand for salad dressing.
Correct answer: The equilibrium price and quantity of salad dressing will fall- A. the equilibrium quantity to rise and the equilibrium price to rise
- B. the equilibrium quantity to rise and the equilibrium price to fall
- C. the equilibrium quantity to rise and the equilibrium price to remain constant
- D. the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise
- E. the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
Explanation: An increase in both demand and supply raises the equilibrium quantity because both shifts push quantity upward.
Correct answer: the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.- A. there is a shortage and the price will rise
- B. the quantity demanded is equal to the quantity supplied and the price remains unchanged
- C. there is a shortage and the price will fall
- D. there is a surplus and the price will rise
Explanation: A price below equilibrium creates excess demand, or a shortage, because quantity demanded exceeds quantity supplied.
Correct answer: there is a shortage and the price will rise- A. an advance in the technology used to manufacture watches
- B. an increase in the price of watches
- C. All of these answers cause an increase in the supply of watches
- D. a decrease in the wage of workers employed to manufacture watches
Explanation: An increase in the price of watches changes quantity supplied through movement along the existing supply curve; it does not shift supply.
Correct answer: an increase in the price of watches- A. many buyers and sellers
- B. none of these answers
- C. firms that are price takers
- D. only one seller
Explanation: A monopoly is defined by a single seller serving the market, usually protected by barriers to entry.
Correct answer: only one seller- A. none of these answers
- B. increases the quantity supplied of that good
- C. increase the supply of that good
- D. decrease the demand for the good
- E. decrease the quantity demanded for that good
Explanation: The law of supply describes movement along the supply curve: when price rises, producers generally offer a greater quantity for sale, all…
Correct answer: increases the quantity supplied of that good- A. Complements
- B. inferior goods
- C. normal goods
- D. none of these answers
- E. Substitutes
Explanation: A higher price for blue jeans increases demand for tennis shoes because consumers can switch between the two goods.
Correct answer: Substitutes- A. increasing average cost curve, marginal cost lies above average cost
- B. increasing average cost curve, marginal cost lies below average cost
- C. decreasing average cost curve marginal cost lies above average cost
- D. decreasing average cost curve, marginal cost lies below average cost
Explanation: A natural monopoly has economies of scale over the relevant range, so its average cost falls as output increases.
Correct answer: decreasing average cost curve, marginal cost lies below average cost- A. vertical merger
- B. horizontal merger
- C. conglomerate merger
- D. hostile takeover
Explanation: A horizontal merger combines firms operating at the same stage of production in the same industry, such as two competing manufacturers.
Correct answer: horizontal merger- A. marginal cost is set equal to marginal revenue
- B. price is less than marginal cost
- C. marginal consumer benefit is less than marginal revenue
- D. there is too little output at too high a cost
Explanation: A monopolist restricts output and charges a price above marginal cost, so some mutually beneficial units are not produced.
Correct answer: there is too little output at too high a cost- A. the marginal cost of production does not equal society's marginal benefit
- B. the distribution is inequitable
- C. economic growth is low
- D. unemployment is high
Explanation: Allocative efficiency requires society's marginal benefit from the last unit to equal its marginal cost, so resources cannot be shifted to…
Correct answer: the marginal cost of production does not equal society's marginal benefit- A. some people can't count
- B. some people may not be permanent resident
- C. not all economic activity is legal
- D. We can't make value judgments to compare different people's welfare
Explanation: Comparing allocations requires judging how changes in one person's welfare should be weighed against changes in another's, which is a…
Correct answer: We can't make value judgments to compare different people's welfare- A. worse off; worse off
- B. better off; better off
- C. better off; worse off
- D. equal, unequal
Explanation: Pareto efficiency means no feasible reallocation can make at least one person better off without making someone else worse off.
Correct answer: better off; worse off2695. A dominant strategy is ?
- A. a wining strategy
- B. a losing strategy
- C. a players best strategy when moving first
- D. a player's best strategy whatever the strategies adopted by rivals
Explanation: A dominant strategy gives a player the best payoff regardless of which strategy the rival chooses.
Correct answer: a player's best strategy whatever the strategies adopted by rivals- A. players are better of to act independently
- B. monopoly is better than competition
- C. people will always cheat
- D. players are better off if they co-operate
Explanation: The Prisoner's Dilemma shows that individually rational choices can leave both players worse off than mutual cooperation would.
Correct answer: players are better off if they co-operate- A. The oligopolist believes that competitors will match output increase but not output reduction
- B. The oligopolist believes that competitors will match price increase but not output reduction
- C. The oligopolist believers that competitors will match price cuts but not price rises
- D. The oligopolist believes that competitors will match price increase but not output increase
Explanation: In the kinked-demand model, rivals are expected to match a price cut but not a price rise.
Correct answer: The oligopolist believers that competitors will match price cuts but not price rises- A. long run marginal cost
- B. short run marginal cost
- C. long run average cost
- D. long run marginal cost
Explanation: A natural monopoly has economies of scale over a large output range, so its long-run average cost keeps declining as output expands.
Correct answer: long run average cost- A. research
- B. cost-saving
- C. technical advance
- D. all of the above
Explanation: Monopoly profits can finance research, cost-saving measures, and technological improvements, which may strengthen the firm's cost or…
Correct answer: all of the above- A. goods are sold at prices above legal or official price.
- B. buyers and/or sellers are not paying taxes as they should
- C. illegal substances are sold
- D. transactions are not recorded in the GDP figures.
Explanation: A black market operates outside official price and legal controls, commonly selling goods above the legally permitted price.
Correct answer: goods are sold at prices above legal or official price.