All Free Economics MCQs with Answers

• A. income
• B. income and wealth
• C. wealth
• D. wage and interest income

Explanation: A household's command over goods and services in a free market depends on both its current income and its accumulated wealth.

• A. points outside the production possibility curve
• B. either points inside or outside the production possibility curve.
• C. points on the production possibility curve
• D. points inside the production possibility curve.

Explanation: Less than full employment means that available resources are not being fully used, so production is below its possible maximum.

• A. the cost incurred in the past before we make a decision about what to do in the future.
• B. a cost that cannot be avoided. regardless of what is done in the future
• C. that which we forgo, or give up, when we make a choice or a decision.
• D. the additional benefit of buying an additional unit of a product

Explanation: Opportunity cost is the value of the next-best alternative sacrificed when a choice is made.

• A. average
• B. expected
• C. total
• D. marginal

Explanation: A student should study when the additional benefit from studying exceeds the additional, or marginal, cost such as forgone leisure or…

• A. aggregate demand
• B. firms
• C. Consumers
• D. industries.

Explanation: Microeconomics studies individual consumers, firms, and particular industries or markets.

• A. Scarcity
• B. Money
• C. Consumption
• D. Allocation

Explanation: Scarcity is the fundamental economic problem because human wants are unlimited while resources are limited.

• A. Has supply but not demand
• B. Has demand but not supply
• C. Has supply and demand
• D. Has market forces and government intervention

Explanation: A mixed economy combines market forces with government intervention in allocating resources.

• A. Market forces
• B. Government intervention
• C. A mixture of government intervention and the free market
• D. The creation of unlimited resources

Explanation: Economic problems arise because resources are scarce relative to unlimited wants; creating unlimited resources would remove the scarcity…

• A. substitute good, inferior good
• B. normal good inferior good
• C. inferior good normal good
• D. normal good, complementary good

Explanation: Higher income usually raises demand for normal goods but reduces demand for inferior goods, which consumers replace as their purchasing…

• A. substitute good
• B. complementary good
• C. bargain
• D. inferior good

Explanation: When A becomes more expensive and consumers buy more B, the two goods serve similar purposes and are substitutes.

• A. incomes
• B. prices of related goods
• C. tastes
• D. all of the above

Explanation: A demand curve shifts when a non-price determinant changes, such as income, the prices of related goods, or consumer tastes.

• A. the price of related goods consumer income
• B. consumer incomes, tastes
• C. the costs of production bank opening hours
• D. the price of related goods preferences

Explanation: Production costs affect supply rather than demand, while bank opening hours are not a standard determinant of market demand.

• A. Demand
• B. Supply
• C. Excess demand
• D. Excess supply

Explanation: Demand is the quantities buyers are willing and able to purchase at different possible prices, usually represented by a demand schedule or…

• A. moves down to the right
• B. moves up to the left
• C. moves up to the right
• D. moves down to the left

Explanation: On the usual graph, a positive relationship means both variables rise together, so the line slopes upward from left to right.

• A. they suggest relationships for explanation, allow testing of hypotheses
• B. they can be used for tables, they can be graphed
• C. they can be used in computers governments use them
• D. they provide interesting information can be summarized

Explanation: Economic data help economists identify relationships between variables and test whether hypotheses are supported by evidence.

• A. no more of the activity.
• B. less of the activity
• C. more of the activity
• D. more or less, depending on the benefits of other activities

Explanation: When marginal benefit exceeds marginal cost, the additional unit provides more benefit than sacrifice, so a rational person should…

• A. government intervenes
• B. government plan production
• C. government interferes
• D. Prices adjust to reconcile scarcity and desires

Explanation: In a free market, prices change in response to shortages, surpluses, and consumer demand.

• A. the time lost in finding it
• B. the quantity of other goods sacrificed to get another unit of that good
• C. the expenditure on the good
• D. the loss of interest in using savings

Explanation: Opportunity cost is the value of the best alternative forgone, commonly expressed as the quantity of another good sacrificed to obtain one…

• A. improving the education of workers
• B. raising union wages.
• C. raising minimum wages.
• D. restricting trade with foreign countries.

Explanation: Education and training can improve workers’ skills, enabling them to produce more output per unit of labour.

• A. Rs 300
• B. Rs 1000
• C. Rs 500
• D. Rs 800

Explanation: The Rs 1,000 already spent is a sunk cost and should not affect the decision.