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.
Last updated
1,742 questions · page 29 of 88
- A. agent
- B. principle
- C. screener
- D. signaler
Explanation: In a principal-agent relationship, the agent performs work on behalf of the principal.
Correct answer: agent- A. be flat (horizontal)
- B. slope upward
- C. slope downward
- D. be U-shaped.
Explanation: Marginal cost moves inversely with marginal product: rising marginal product makes marginal cost fall, while diminishing marginal product…
Correct answer: be U-shaped.- A. average fixed cost is rising
- B. average total cost is falling
- C. average total cost is raising
- D. average total cost is minimized
Explanation: When marginal cost is below average total cost, it pulls the average downward, just as a value below an average lowers that average.
Correct answer: average total cost is falling- A. is linear (a straight line)
- B. becomes steeper as the quantity of the input increase
- C. could be any of these answers
- D. becomes flatter as the quantity of the input increase
Explanation: The slope of a production function is the marginal product of the input.
Correct answer: becomes flatter as the quantity of the input increase- A. Rs80,000
- B. Rs30,000
- C. Rs75,000
- D. Rs70,000
Explanation: Revenue is Rs100,000, while explicit costs are Rs20,000 for materials and Rs5,000 interest on the loan.
Correct answer: Rs30,000- A. average fixed cost
- B. average total cost
- C. average variable cost
- D. marginal cost
Explanation: The efficient scale is the output level at which average total cost reaches its minimum.
Correct answer: average total cost- A. an increase in average total costs
- B. diseconomies of scale
- C. economies of scale
- D. constant returns to scale
Explanation: A very small factory can usually lower its average cost by expanding and spreading fixed costs over more output, producing economies of…
Correct answer: economies of scale- A. average total cost is falling
- B. average total cost is raising
- C. average total cost is maximized
- D. average total cost is minimized
Explanation: Marginal cost intersects average total cost at its minimum: below that point, marginal cost pulls average cost down, and above it…
Correct answer: average total cost is minimized- A. rent on the factory
- B. wages paid to factory labor
- C. interest payments on borrowed financial capital
- D. payments on the lease for factory equipment
- E. salaries paid to upper management
Explanation: Factory labour wages usually vary with the quantity produced or hours worked, making them a variable cost in the short run.
Correct answer: wages paid to factory labor- A. is liner (a straight line)
- B. could be any of these answers
- C. becomes steeper as the quantity of output increases
- D. become flatter as the quantity of output increases.
Explanation: Diminishing marginal product means each additional input produces less extra output, so producing additional units requires increasingly…
Correct answer: becomes steeper as the quantity of output increases- A. accounting profit will exceed economic profit
- B. economic profit will always be zero
- C. economic profit will exceed accounting profit
- D. accounting profit will always be zero
- E. economic profit and accounting profit will be equal
Explanation: Accounting profit subtracts only explicit monetary costs, whereas economic profit also subtracts implicit opportunity costs.
Correct answer: accounting profit will exceed economic profit- A. Rs30,000
- B. Rs35,000
- C. Rs75,000
- D. Rs70,000
Explanation: Accounting profit subtracts explicit costs only: Rs20,000 for materials and Rs5,000 interest on borrowed funds.
Correct answer: Rs75,000- A. implicit costs
- B. variable costs
- C. the sum of implicit and explicit costs.
- D. explicit costs.
- E. marginal costs
Explanation: Accounting profit records actual monetary payments made by the firm, called explicit costs.
Correct answer: explicit costs.- A. Eu consumers who buy electronics from Japan
- B. EU farmers who export grain
- C. employees of EU car manufacturers
- D. Shareholders of German carmaker BMW
Explanation: A quota on Japanese cars can protect EU car producers and raise their employees’ and shareholders’ returns, while cheaper foreign currency…
Correct answer: EU farmers who export grain- A. a natural monopoly
- B. an LDC's limit of one firm to an industry
- C. an individual firm facing a horizontal (perfectly elastic) demand curve in LDCs
- D. The existence of oligopoly
Explanation: A natural monopoly occurs when economies of scale make average cost fall over the relevant market range, so one large firm can supply the…
Correct answer: a natural monopoly- A. mobile phone
- B. electricity
- C. water supply
- D. postal service
Explanation: Mobile-phone service can generally be supplied by competing firms, so it is not normally classified as a natural monopoly.
Correct answer: mobile phone- A. 800
- B. 40,000
- C. more than zero but less than 800
- D. less than zero
Explanation: Discounting makes each future $200 payment worth less than $200 today, although every payment remains positive.
Correct answer: more than zero but less than 800- A. wage costs per unit of output
- B. wage rate that prevails in LDCs
- C. Wage rate divided by the productivity of labor
- D. marginal product of labor divided by wage
Explanation: The efficiency wage is measured as the wage cost per unit of effective labour or output, expressed here as the wage rate divided by labour…
Correct answer: Wage rate divided by the productivity of labor579. Economic rent ?
- A. is productive activity to obtain private benefit from public action and resources
- B. are the payments above the minimum essential to attract the resources to the market?
- C. is the wage used to pay unskilled workers?
- D. does not include monopoly profits
Explanation: Economic rent is the payment to a factor of production above the minimum required to keep it in its present use.
Correct answer: are the payments above the minimum essential to attract the resources to the market?- A. stay the same
- B. rotate inward
- C. shift outward in a parallel fashion
- D. rotates outward
- E. shift inward in parallel fashion
Explanation: Doubling income doubles both budget intercepts, while doubling both prices halves each intercept.
Correct answer: stay the same