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 163 of 202
- A. the market allocates buyers to the sellers who can produce the good at least cost
- B. all these answers
- C. none of these answers
- D. the quantity produced in the market maximizes the sum of consumer and producer surplus
- E. the market allocates output to the buyers that value it the most
Explanation: Efficiency requires both producing at the lowest possible cost and allocating goods to buyers who value them most.
Correct answer: all these answers- A. choose a price below the market equilibrium price
- B. allow the market to seek equilibrium on its own.
- C. Choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).
- D. choose a price above the market equilibrium price
Explanation: In a competitive market, equilibrium quantity maximizes the combined benefits of buyers and sellers because marginal benefit equals…
Correct answer: allow the market to seek equilibrium on its own.- A. increase producer surplus
- B. does all the things describe in these answers
- C. decrease producer surplus
- D. improves market equity
Explanation: With the supply curve fixed, a higher price increases the amount sellers receive above their minimum acceptable prices.
Correct answer: increase producer surplus- A. above the supply curve and below the price
- B. below the demand curve and above the price
- C. below the demand curve and above the supply curve
- D. below the supply curve and above the price
- E. above the demand curve and below the price
Explanation: Total surplus combines consumer surplus and producer surplus, so it is the area between the demand curve, which shows value, and the…
Correct answer: below the demand curve and above the supply curve- A. the value placed on the last unit of production by buyers exceeds the cost of production
- B. the cost of production on the last unit produced exceeds the value placed on it by buyers.
- C. consumer surplus is maximized
- D. total surplus is maximized
- E. producer surplus is maximized
Explanation: Beyond equilibrium quantity, the cost of producing the next unit is greater than the value buyers place on it.
Correct answer: the cost of production on the last unit produced exceeds the value placed on it by buyers.- A. Three vases will be sold, and consumer surplus is Rs80
- B. One vase will be sold, and consumer surplus is Rs5.
- C. One vase will be sold, and consumer surplus is Rs30.
- D. Three vases will be sold, and consumer surplus is Rs0.
- E. Two vases will be sold, and consumer surplus is Rs5.
Explanation: At Rs25, buyers 1 and 2 purchase because their willingness to pay is at least the price, while buyer 3 does not.
Correct answer: Two vases will be sold, and consumer surplus is Rs5.- A. Rs18,000
- B. Rs20,000
- C. Rs2,000
- D. Rs0.
Explanation: Consumer surplus equals willingness to pay minus the actual price paid: Rs20,000 − Rs18,000 = Rs2,000.
Correct answer: Rs2,000- A. below the demand curve and above the price.
- B. above the supply curve and below the price.
- C. above the demand curve and below the price.
- D. below the supply curve and above the price.
- E. below the demand curve and above the supply curve
Explanation: Consumer surplus is the benefit buyers receive above the market price, represented by the area below the demand curve and above the price…
Correct answer: below the demand curve and above the price.- A. 5 percent
- B. 10 percent
- C. 15 percent
- D. 20 percent
Explanation: Effective protection equals the tariff on final output divided by the share of domestic value added: 10% ÷ (1 − 0.5) = 20%.
Correct answer: 20 percent- A. never
- B. sometimes
- C. always
- D. None of these
Explanation: A large country can sometimes gain from a tariff because reduced import demand may lower the foreign export price and improve its terms of…
Correct answer: sometimes- A. the domestic price of the product will increase by more than the tariff itself
- B. The domestic price of the product will increase by the same amount as the tariff
- C. The domestic price of the product will increase by less than the tariff
- D. None of the above
Explanation: For a large country, the tariff reduces its import demand and can force foreign exporters to lower their price.
Correct answer: The domestic price of the product will increase by less than the tariff- A. scientific tariff argument
- B. infant industry argument
- C. beggar they neighbor argument
- D. foreign dumping argument
Explanation: The infant-industry argument supports temporary protection for new domestic industries until they develop economies of scale, skills, and…
Correct answer: infant industry argument- A. a revenue effect and redistribution effect
- B. revenue effect and protection effect
- C. consumption effect and protection effect
- D. redistribution effect and consumption effect
Explanation: A prohibitive tariff eliminates imports, so the government collects no tariff revenue.
Correct answer: consumption effect and protection effect- A. distinguishes between tariffs that are effective and those that are ineffective
- B. is the minimum level at Which a tariff becomes effective in limiting imports?
- C. shows how effective a tariff is in raising revenue for the government
- D. shows the increase in value added for domestic production that a particular tariff structure makes possible, in percentage terms
Explanation: The effective rate of protection measures the percentage increase in domestic value added caused by the complete tariff structure…
Correct answer: shows the increase in value added for domestic production that a particular tariff structure makes possible, in percentage terms- A. fixed amount of money per unit traded
- B. a percentage of money per unit traded
- C. a percentage of the quantity of imports
- D. All of the above
Explanation: A specific tariff is charged as a fixed monetary amount for each physical unit imported, such as $5 per kilogram.
Correct answer: fixed amount of money per unit traded- A. valid for stereos, but nor for most products imported by Pakistan
- B. valid for most products imported by Pakistan but not for stereos
- C. deceiving since Koreans eventually spend the dollars on Pakistani goods
- D. deceiving since the dollars spent on a stereo built in the Pakistan eventually wind up overseas
Explanation: The argument misleadingly treats the initial movement of currency as a permanent loss: South Korea can use the dollars to purchase…
Correct answer: deceiving since Koreans eventually spend the dollars on Pakistani goods3257. For advanced countries such as the United States, tariffs on imported raw materials tend to be ?
- A. equals to tariffs on imported manufactured goods
- B. lower than tariffs on imported manufactured goods
- C. higher than tariffs on imported manufactured goods
- D. The highest of all tariffs
Explanation: Advanced countries commonly apply tariff escalation: raw materials face lower duties, while processed and manufactured goods face higher…
Correct answer: lower than tariffs on imported manufactured goods- A. Ad valorem tariff
- B. Specific tariff
- C. Effective tariff
- D. Compound tariff
Explanation: An ad valorem tariff is charged as a percentage of the imported item's value, such as 15 percent.
Correct answer: Ad valorem tariff- A. The purpose is to maintain protection for an indefinite time period
- B. The industry is characterized by increasing returns to scale
- C. The economy operates during a recession
- D. The protected industry provides invaluable goods during periods of war
Explanation: The national-security argument is strongest for industries supplying essential goods during war, such as defence equipment or strategic…
Correct answer: The protected industry provides invaluable goods during periods of war- A. nominal tariff rate on the final product equals the effective tariff rate on the product
- B. nominal tariff rate on the final product is greater than the effective rate on the product
- C. nominal tariff rate on the final product is less than the effective tariff rate on the final product
- D. None of the above
Explanation: The effective rate of protection measures protection of domestic value added.
Correct answer: nominal tariff rate on the final product equals the effective tariff rate on the product