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 31 of 88
- A. perfectly inelastic
- B. perfectly elastic
- C. upward sloping
- D. downward sloping
Explanation: When a scarce input becomes more expensive as the industry expands, firms face rising costs, producing an upward-sloping long-run supply…
Correct answer: upward sloping- A. marginal revenue
- B. marginal cost
- C. average total cost
- D. average revenue
Explanation: In the long run, all costs are avoidable, so a firm exits when its price cannot cover average total cost.
Correct answer: average total cost- A. variable costs of staying open are less than the total revenue due to staying open.
- B. total costs of staying open are less than the total revenue due to staying open
- C. variable costs of staying open are greater than the total revenue due to staying open
- D. total costs of staying open are greater than the total revenue due to staying open
Explanation: The store should close temporarily when the revenue from remaining open is less than its variable costs, as staying open would add to its…
Correct answer: variable costs of staying open are greater than the total revenue due to staying open- A. Upward-sloping portion of the average total cost curve
- B. upward-sloping portion of the average variable cost curve
- C. portion of the marginal cost curve that lies above the average total cost curve.
- D. entire marginal cost curve.
- E. portion of the marginal-cost curve that lies above the average variable cost curve
Explanation: A competitive firm supplies output where price covers marginal cost, but only while price is at least average variable cost.
Correct answer: portion of the marginal-cost curve that lies above the average variable cost curve- A. price equals average variable cost
- B. marginal revenue equals average revenue
- C. marginal cost equals total revenue
- D. marginal cost equals marginal revenue
Explanation: Profit rises while the revenue from one more unit exceeds its cost, and falls when that cost is higher.
Correct answer: marginal cost equals marginal revenue- A. doubles.
- B. more than double
- C. less than doubles.
- D. cannot be determined because the price of the good may rise or fall
Explanation: A competitive firm is a price taker, so doubling output leaves the market price unchanged and doubles total revenue, since total revenue…
Correct answer: doubles.- A. All of these answers are characteristic of a competitive market
- B. The are many buyers and sellers in the market
- C. The goods offered for sale are largely the same.
- D. Firms generate small but positive economic profits in the long run
- E. Firms can freely enter or exit the market
Explanation: Free entry and exit eliminate positive economic profit in the long run, leaving firms with normal profit.
Correct answer: Firms generate small but positive economic profits in the long run- A. price = average cost = marginal cost
- B. price = average cost = total cost
- C. price = marginal cost = total cost
- D. Total revenue = Total variable cost
Explanation: Long-run competitive equilibrium occurs where price equals marginal cost and average total cost at its minimum, so firms earn zero…
Correct answer: price = average cost = marginal cost- A. A few firms dominate the industry
- B. Firms are price makers
- C. There are many buyers but few sellers
- D. There are many buyers and sellers
Explanation: Perfect competition has many buyers and sellers, with each firm too small to influence the market price.
Correct answer: There are many buyers and sellers- A. Price is greater than marginal cost
- B. price equals marginal cost
- C. price is less than marginal cost
- D. None of the above
Explanation: A competitive firm maximizes profit at the output where price, which equals marginal revenue, equals marginal cost.
Correct answer: price equals marginal cost- A. Horizontal
- B. vertical
- C. downward sloping
- D. elastic
Explanation: An individual competitive firm's demand curve is horizontal because it can sell any feasible quantity at the prevailing market price but…
Correct answer: Horizontal- A. many buyers and sellers
- B. a standard product
- C. free entry and exit
- D. perfect information
- E. all of the above
Explanation: Perfect competition assumes many buyers and sellers, a standardized product, free entry and exit, and perfect information.
Correct answer: all of the above- A. is a price taker
- B. Producer different products
- C. Believes that can influence price
- D. Prevents the entry of competitors
Explanation: No individual buyer or seller is large enough to influence the market price in a competitive industry, so each accepts the prevailing…
Correct answer: is a price taker- A. decreasing returns to scale
- B. The law of diminishing returns
- C. constant returns to scale
- D. an inefficient production technique
Explanation: When other inputs are fixed and additional units of one variable input eventually add less to output, the law of diminishing returns is…
Correct answer: The law of diminishing returns- A. long run average cost is lowest
- B. marginal revenue equals output
- C. marginal revenue equals long run marginal cost
- D. marginal cost equals output
Explanation: A firm chooses its long-run profit-maximizing output where marginal revenue equals long-run marginal cost, provided production is…
Correct answer: marginal revenue equals long run marginal cost- A. Efficient scale
- B. Average efficient scale
- C. Maximum efficient scale
- D. Minimum efficient scale
Explanation: Minimum efficient scale is the smallest output at which a firm fully exploits economies of scale and reaches the minimum long-run average…
Correct answer: Minimum efficient scale- A. Short run marginal cost rises, output rises
- B. long run marginal cost rises, output rises
- C. Short run average cost rises, output rises
- D. long run average cost rises, output rises
Explanation: Decreasing returns to scale means that increasing all inputs causes output to rise by a smaller proportion, which is reflected by rising…
Correct answer: long run average cost rises, output rises- A. output is maximized
- B. inputs are minimized
- C. there is no way to make a given output using less of one input and no more of the other inputs
- D. Costs are minimized
Explanation: Technical efficiency means producing a given output with no possibility of reducing one input without increasing another.
Correct answer: there is no way to make a given output using less of one input and no more of the other inputs- A. Unique Selling Proposition
- B. Underlying Sales Proposition
- C. Unit Sales Point
- D. Under Sales Procedure
Explanation: USP means Unique Selling Proposition, the distinctive benefit or feature that makes a product stand out from competitors.
Correct answer: Unique Selling Proposition- A. an increase in the number of firms in the market but no increase in the price of the good
- B. an increase the price of the good and an increase in the number of firms in the market
- C. an increase the price of the good but no increase in the number of firms in the market
- D. no impact on either the price of the good or the number of firms in the market
Explanation: With perfectly elastic long-run supply, the market price remains fixed after demand increases.
Correct answer: an increase in the number of firms in the market but no increase in the price of the good