Free Microeconomics MCQs with Answers
1,742 Microeconomics MCQs from Economics, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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- A. Complementary goods
- B. Substitute goods
- C. Inferior goods
- D. Public goods
Explanation: Substitute goods satisfy similar wants, so a higher price for tea shifts consumers toward coffee.
Correct answer: Substitute goods- A. A normal good
- B. An inferior good
- C. A luxury good
- D. A complementary good
Explanation: Demand for an inferior good falls when income rises, because consumers shift toward preferred alternatives.
Correct answer: An inferior good- A. The historical purchase price only
- B. The next-best use forgone
- C. The firm's total fixed cost
- D. The building's physical depreciation
Explanation: Opportunity cost is the value of the best alternative that is sacrificed.
Correct answer: The next-best use forgone24. When marginal cost is below average total cost, the average total cost of production is generally:
- A. Rising
- B. Falling
- C. Constant at zero
- D. Equal to marginal revenue
Explanation: A marginal value below an average pulls the average downward, so average total cost falls.
Correct answer: Falling- A. Market price increases
- B. Scale of production increases
- C. Variable cost decreases
- D. Profit margin increases
Explanation: Economies of scale mean that larger-scale production lowers long-run average cost.
Correct answer: Scale of production increases- A. Perfectly inelastic
- B. Unit elastic
- C. Perfectly elastic
- D. Equal to marginal cost
Explanation: Total revenue reaches its maximum where the absolute value of price elasticity of demand is one.
Correct answer: Unit elastic- A. Positive economic profit permanently
- B. Zero economic profit with excess capacity
- C. Zero accounting revenue with no output
- D. A guaranteed loss below average cost
Explanation: Entry and exit tend to eliminate economic profit in the long run. Product differentiation leaves each firm facing a downward-sloping…
Correct answer: Zero economic profit with excess capacity- A. A smaller share of the tax
- B. A larger share of the tax
- C. No share of the tax
- D. The entire tax by definition
Explanation: The less elastic side has fewer practical alternatives and therefore is less able to change its quantity.
Correct answer: A larger share of the tax29. Compared with perfect competition, a single-price monopoly generally produces an output that is:
- A. Higher and priced lower
- B. Lower and priced higher
- C. Equal and priced lower
- D. Higher and priced higher
Explanation: A monopoly restricts output below the competitive level and charges a price above marginal cost.
Correct answer: Lower and priced higher- A. Workers' personal savings
- B. Demand for the firm's output
- C. Government's tax collection
- D. Firm's historical wage bill
Explanation: Firms hire labour because workers help produce goods and services that consumers demand.
Correct answer: Demand for the firm's output- A. A change in the product's own price
- B. A change in the price of raw materials
- C. A change in production technology
- D. A change in the number of sellers
Explanation: A change in the product's own price changes the quantity supplied and causes movement along the existing supply curve.
Correct answer: A change in the product's own price32. If the cross-price elasticity of demand between two goods is negative, the goods are most likely:
- A. Substitute goods
- B. Complementary goods
- C. Normal goods
- D. Inferior goods
Explanation: A negative cross-price elasticity means that a rise in the price of one good reduces demand for the other.
Correct answer: Complementary goods33. Which statement about a firm's average fixed cost is correct as output increases in the short run?
- A. It normally rises continuously
- B. It normally remains unchanged
- C. It normally falls as fixed cost spreads
- D. It first falls and then becomes zero
Explanation: Average fixed cost equals total fixed cost divided by output. Since fixed cost does not change in the short run, producing more units…
Correct answer: It normally falls as fixed cost spreads- A. Revenue earned from selling total output
- B. Extra revenue from selling one more unit
- C. Revenue remaining after paying variable cost
- D. Revenue divided by the number of workers
Explanation: Marginal revenue is the change in total revenue caused by selling one additional unit of output.
Correct answer: Extra revenue from selling one more unit- A. Sells a unique product
- B. Controls the market supply
- C. Accepts the market price
- D. Can prevent new firms entering
Explanation: A perfectly competitive firm is a price taker because its individual output is too small to influence the market price.
Correct answer: Accepts the market price- A. Produces beyond the efficient output
- B. Charges a price below marginal cost
- C. Restricts output below the efficient level
- D. Faces a perfectly elastic demand curve
Explanation: A single-price monopolist restricts output and charges a price above marginal cost.
Correct answer: Restricts output below the efficient level- A. All inputs become fixed
- B. All costs become sunk
- C. All inputs can be adjusted
- D. Market demand becomes vertical
Explanation: The long run is a period in which the firm can adjust all inputs and exit the industry.
Correct answer: All inputs can be adjusted- A. Property rights are unclear and bargaining is costly
- B. Property rights are clear and transaction costs are low
- C. The government fixes every market price
- D. Consumers have identical income levels
Explanation: The Coase theorem states that clearly assigned property rights and low transaction costs can allow affected parties to bargain toward an…
Correct answer: Property rights are clear and transaction costs are low- A. Only if both comparative and absolute advantage are present in both countries.
- B. If opportunity costs are the same in the countries involved.
- C. Only if there are economies of scale available.
- D. If countries specialize in the production of goods in which they are relatively more efficient.Download Interactive Maps
Explanation: Comparative advantage depends on relative opportunity costs, so countries gain by specializing in goods they produce at lower opportunity…
Correct answer: If countries specialize in the production of goods in which they are relatively more efficient.Download Interactive Maps- A. Alfred Marshall
- B. Adam Smith
- C. Lionel Robbins
- D. None of these
Explanation: Adam Smith presented the theory of absolute advantage in The Wealth of Nations.
Correct answer: Adam Smith