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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1,742 questions · page 28 of 88
- A. Competitive pricing.
- B. Price discrimination
- C. price discounting.
- D. price fixing.
Explanation: Price discrimination occurs when a seller charges different prices to different buyers for the same product, usually because their…
Correct answer: Price discrimination- A. production merger
- B. vertical merger
- C. conglomerate merger.
- D. horizontal merger
Explanation: A vertical merger joins firms operating at different stages of the same supply chain, such as a manufacturer combining with a distributor…
Correct answer: vertical merger- A. a conglomerate merger.
- B. a horizontal merger
- C. a complementary products merger.
- D. a vertical merger
Explanation: A paper producer supplies an important input to a book publisher, so the firms operate at successive stages of production and…
Correct answer: a vertical merger- A. firms producing unrelated products
- B. firms producing complementary products
- C. firms at various stages in a production process.
- D. firms producing the same product
Explanation: A horizontal merger combines firms operating at the same stage and producing the same or closely similar products, such as two competing…
Correct answer: firms producing the same product- A. is that if encourages firms to engage in research which leads to new products
- B. is the revenue generated from the fines paid by those individuals who are found guilty of antitrust violation?
- C. Is that this policy serves to deter firms from engaging in such practices as collusion, price-fixing and deceptive advertising
- D. is that it forces firms to produce efficiently.
Explanation: Antimonopoly enforcement is mainly justified because the threat of penalties deters harmful conduct such as collusion, price-fixing, and…
Correct answer: Is that this policy serves to deter firms from engaging in such practices as collusion, price-fixing and deceptive advertising- A. Car licenses are very expensive vehicle entry to the city center is very restricted road pricing is being introduced and modern cheap rail transport is being expanded.
- B. London
- C. Athens
- D. Singapore
- E. New York
Explanation: Singapore is associated with expensive vehicle ownership, restrictions on entering the central area, road pricing, and expanded mass rail…
Correct answer: Singapore- A. Environmentally damaging
- B. an inferior good
- C. a potential public good
- D. a superior good
Explanation: If motoring takes a larger share of household expenditure as income rises, its income elasticity is positive and greater than one, making…
Correct answer: a superior good- A. people are rational maximizers
- B. People are reluctant to change their minds
- C. People are inconsistent over time
- D. People care about fairness
Explanation: Workers may view bonuses as fair recognition of their contribution during profitable years, and withholding them can create resentment…
Correct answer: People care about fairness- A. people give too much weight to a small number of vivid observations
- B. People are sometimes too sure of their own abilities
- C. All of these answers are actually true statements about how people make decisions.
- D. People are always rational maximizers
- E. People are reluctant to change their minds in the face of new information
Explanation: Behavioral economics shows that people may rely too heavily on vivid examples, be overconfident, and resist updating beliefs.
Correct answer: People are always rational maximizers- A. Rs20,000; Rs20,000; Rs22,000
- B. Rs1,000; Rs14,333; Rs1,000
- C. Rs20,000; Rs13,100; Rs1,000
- D. Rs1,000; Rs20,000; Rs22,000
Explanation: The median is Rs20,000 because the cumulative share first exceeds 50% at that preference, while the weighted average is Rs13,100.
Correct answer: Rs20,000; Rs13,100; Rs1,000- A. Josephine doesn't buy health insurance because it is too expensive, and she is healthy
- B. A life insurance company forces Enzo to have a medical examination prior to selling him insurance
- C. Enzo drives more recklessly after he buys car insurance
- D. Fatima chooses to attend a well-respected college
Explanation: Moral hazard occurs when insurance changes a person's behaviour after coverage is obtained, because the insurer bears part of the cost.
Correct answer: Enzo drives more recklessly after he buys car insurance- A. It must be "as seen on TV"
- B. It must be free to the signaling party
- C. It must be costly to the signaling party but less costly to the party with higher-quality product
- D. It must be applied to an inexpensive product
Explanation: A signal works when it is relatively more costly for low-quality sellers than for high-quality sellers, allowing buyers to distinguish…
Correct answer: It must be costly to the signaling party but less costly to the party with higher-quality product- A. screening
- B. signaling
- C. moral hazard
- D. adverse selection
Explanation: Screening is information gathering by the less-informed party, such as a buyer having a mechanic inspect a car.
Correct answer: screening- A. all of these answers
- B. forced contributions to a retirement plan
- C. year-end bonuses
- D. efficiency wages
Explanation: Forced retirement contributions help people overcome present bias by committing part of their current income to future needs.
Correct answer: forced contributions to a retirement plan- A. People give too much weight to a small number of vivid observations
- B. People easily change their minds when confronted with new information
- C. People enjoy going to the doctor
- D. People tend to plan ahead and follow through on their plans
Explanation: Jamil's sudden concern after his friend's death illustrates the availability or salience bias: a vivid recent event receives excessive…
Correct answer: People give too much weight to a small number of vivid observations- A. There is no rational solution
- B. 75/25
- C. 99/1
- D. 1/99
- E. 50/50
Explanation: Under the standard self-interest assumption, the proposer offers the smallest positive share, 1%, and keeps 99%, while the responder…
Correct answer: 99/1- A. The average preferred outcome wins
- B. There is no clear winner due to Arrow's Impossibility Theorem.
- C. The outcome preferred by the median voter wins
- D. The outcome preferred by the greatest number of voters wins.
Explanation: With single-peaked preferences, pairwise majority voting selects the median voter's preferred outcome: it defeats alternatives on either…
Correct answer: The outcome preferred by the median voter wins- A. The median voter always wins
- B. no dictators
- C. independence of irrelevant
- D. transitivity
Explanation: Arrow's required properties include transitivity, independence of irrelevant alternatives, and no dictatorship, but not that the median…
Correct answer: The median voter always wins- A. They pay employees with delayed compensation such as a year-end bonus
- B. They buy life insurance on their workers
- C. They pay above equilibrium wages
- D. They put hidden video cameras in the workplace
Explanation: Delayed pay, efficiency wages, and workplace monitoring discourage shirking by making hidden actions costly.
Correct answer: They buy life insurance on their workers- A. Enzo carefully chooses a special gift for Josephine
- B. Josephine earns her MBA from the Harvard Business School
- C. Lexus advertises its cars during the football World Cup Final.
- D. All of these answers are correct
Explanation: A Harvard MBA can signal ability, advertising can signal product quality, and a carefully chosen gift can reveal information about the…
Correct answer: All of these answers are correct