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 146 of 202
2901. Money is ?
- A. The value of all coins and currency in circulation at any time
- B. Anything that is generally accepted as a medium of exchange
- C. The same as income
- D. All of the above
Explanation: Money is anything generally accepted for buying goods and services, making it a medium of exchange.
Correct answer: Anything that is generally accepted as a medium of exchange- A. charging different prices on the basis of race
- B. charging different prices for goods with different costs of production
- C. charging different prices based on cost-of-service differences
- D. selling a certain product of given quality and cost per unit at different prices to different buyers
Explanation: Price discrimination occurs when the same product of identical quality and cost is sold to different buyers at different prices.
Correct answer: selling a certain product of given quality and cost per unit at different prices to different buyers- A. charge a higher price
- B. produce a lower quantity of the product
- C. make a greater amount of economic profit
- D. all of the above
Explanation: A monopolist restricts output to raise price, so it generally charges more and produces less than a perfectly competitive industry.
Correct answer: all of the above- A. the price is greater than the marginal revenue
- B. the price is less than the marginal revenue
- C. there is no relation
- D. they are equal
Explanation: A monopolist faces a downward-sloping demand curve, so selling an additional unit requires lowering the price and reduces revenue on…
Correct answer: the price is greater than the marginal revenue- A. increase should
- B. decrease output
- C. keep output the same because profits are maximized when marginal revenue exceeds marginal cost
- D. raise the price
Explanation: When marginal revenue exceeds marginal cost, producing one more unit adds more to revenue than to cost, so profit rises.
Correct answer: increase should- A. will rise
- B. will fall
- C. will remain the same
- D. could either rise or fall depending on the elasticity of the monopolist's supply curve
Explanation: A natural monopoly exists because one large firm can produce at lower average cost through economies of scale.
Correct answer: will rise- A. tends to be inefficient.
- B. usually lowers the cost of production dramatically.
- C. creates synergies between the newly acquired firm and other government-owned companies.
- D. does none of the things described in these answers
Explanation: Public ownership can reduce some monopoly problems but often suffers from weak competitive pressure and bureaucratic inefficiency.
Correct answer: tends to be inefficient.- A. higher prices and lower output
- B. higher prices and higher output
- C. lower prices and lower output
- D. lower prices and higher output
Explanation: A monopoly restricts output below the competitive level and uses the resulting scarcity to charge a higher price.
Correct answer: higher prices and lower output- A. marginal revenue equals marginal cost
- B. marginal revenue equals price
- C. marginal cost equals price
- D. marginal cost equals demand
- E. none of these answers
Explanation: Profit changes by marginal revenue minus marginal cost when output changes by one unit.
Correct answer: marginal revenue equals marginal cost- A. natural monopoly
- B. perfect competitor
- C. government monopoly
- D. regulated monopoly
Explanation: When average total cost keeps falling over the entire market demand, one large firm can supply the market more cheaply than several…
Correct answer: natural monopoly- A. Bans monopolies
- B. Fines all monopolies
- C. Prevents firms acquiring more than 25% of the market
- D. Has the right to investigate monopolies and will assess each one on its own merits
Explanation: UK competition policy does not automatically ban or fine every monopoly, nor does it impose a universal 25% market-share limit.
Correct answer: Has the right to investigate monopolies and will assess each one on its own merits- A. Monopolies are inefficient
- B. Monopoly profits ac as an incentive for innovation
- C. Monopolies are alocatively efficient
- D. Monopolies are productively efficient
Explanation: Schumpeter argued that monopoly profits can provide funds and incentives for research, development and innovation.
Correct answer: Monopoly profits ac as an incentive for innovation- A. The firm is Productively efficient
- B. The firm is allocatively inefficient
- C. The firm produces where marginal cost is less than marginal revenue
- D. The firm produces at the socially optimal level
Explanation: A monopolist maximises profit where marginal revenue equals marginal cost, but price exceeds marginal cost.
Correct answer: The firm is allocatively inefficient- A. Equals the demand curve
- B. Is parallel with the demand curve
- C. Lies below and converges with the demand curve
- D. Lies below and diverges from the demand curve
Explanation: A monopolist must lower its price to sell additional output, so marginal revenue lies below the demand curve.
Correct answer: Lies below and diverges from the demand curve- A. The section with the richest people
- B. The section with the oldest people
- C. The section with the most inelastic demand
- D. The section with the most elastic demand
Explanation: Price discrimination is most profitable where buyers are least responsive to price, because demand is inelastic and quantity falls…
Correct answer: The section with the most inelastic demand- A. some degree of monopoly power
- B. an ability to separate the market
- C. an ability to prevent reselling
- D. all of the above
Explanation: Price discrimination requires market power, separate identifiable market segments, and the ability to stop buyers in the low-price segment…
Correct answer: all of the above- A. marginal revenue equals average total cost
- B. Price equals marginal revenue
- C. marginal revenue equals marginal cost
- D. total revenue equals total cost
Explanation: A profit-maximizing firm expands output while the extra revenue exceeds the extra cost and stops where marginal revenue equals marginal…
Correct answer: marginal revenue equals marginal cost- A. One seller of the product
- B. low barriers to entry
- C. close substitute products
- D. perfect information
Explanation: Pure monopoly has a single seller and strong barriers that prevent other firms from entering.
Correct answer: One seller of the product- A. there is some barrier to entry to that market
- B. Potential competitors sometimes don't notice the the profits.
- C. the monopolist is financially powerful.
- D. antitrust laws eliminate competitors for a specified number of years.
- E. of all of the things described in these answers
Explanation: Long-run economic profits can persist only when entry is blocked by barriers such as patents, legal restrictions, control of key…
Correct answer: there is some barrier to entry to that market- A. Perfect price discrimination generates a deadweight loss
- B. Price discrimination can raise economic welfare.
- C. price discrimination requires that seller be able to separate buyers according to their willingness to pay.
- D. Price discrimination increases a monopolist's profits.
- E. For a monopolist to engage in price discrimination buyers must be unable to engage in arbitrage.
Explanation: Perfect price discrimination eliminates deadweight loss by allowing the monopolist to sell every unit for which willingness to pay covers…
Correct answer: Perfect price discrimination generates a deadweight loss