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 32 of 88
- A. downward sloping
- B. perfectly inelastic
- C. upward sloping
- D. perfectly elastic
Explanation: Identical costs and readily available inputs imply a constant-cost industry: firms can enter without raising input prices or production…
Correct answer: perfectly elastic- A. is always more elastic than the short-run market supply curve.
- B. is always perfectly elastic
- C. has the same elasticity as the short run market supply curve
- D. is always less elastic than the short-run market supply curve
Explanation: The long run permits firms to enter or leave and to adjust all inputs, so market supply normally responds more strongly to price changes…
Correct answer: is always more elastic than the short-run market supply curve.- A. entire marginal cost curve
- B. upward-sloping portion of the average total cost curve
- C. portion of the marginal cost curve that lies above the average total cost curve
- D. upward-sloping portion of the average variable cost curve
- E. portion of the marginal cost curve that lies above the average variable cost curve.
Explanation: In the long run, a competitive firm supplies output along the rising part of its marginal-cost curve only when price covers average total…
Correct answer: portion of the marginal cost curve that lies above the average total cost curve- A. decreased production
- B. maintained production at the current level
- C. temporarily shut down.
- D. increased production
Explanation: When marginal revenue exceeds marginal cost, the extra unit adds more to revenue than to cost.
Correct answer: increased production- A. total revenue divided by the quantity sold
- B. equal to the quantity of the good sold
- C. average revenue divided by the quantity sold
- D. equal to the price of the good sold
Explanation: A competitive firm is a price taker, so selling one additional unit adds exactly the market price to total revenue.
Correct answer: equal to the price of the good sold626. Which of the following market would most closely satisfy the requirements for a competitive market ?
- A. electricity
- B. cable television
- C. cola
- D. milk
- E. All of these answers represent competitive markets
Explanation: Milk is produced by many relatively small sellers and is fairly homogeneous, making it closer to a competitive market than electricity…
Correct answer: milk- A. Price equals marginal revenue
- B. price is greater than marginal revenue
- C. price equals total revenue
- D. price equals total cost
Explanation: A perfectly competitive firm can sell any feasible quantity at the prevailing market price, so its marginal revenue from another unit…
Correct answer: Price equals marginal revenue- A. The price covers average variable cost
- B. The price covers variable cost
- C. The price covers average fixed cost
- D. The price covers fixed costs
Explanation: In the short run, fixed costs must be paid even if output is zero, so the firm continues producing when price covers average variable…
Correct answer: The price covers average variable cost- A. Total revenue is maximized
- B. Marginal revenue equals zero
- C. Marginal revenue equals marginal cost
- D. Marginal revenue equals average cost
Explanation: Profit rises when the revenue from an additional unit exceeds its additional cost and falls when the reverse is true.
Correct answer: Marginal revenue equals marginal cost- A. perfectly elastic demand curve
- B. perfectly inelastic demand curve
- C. perfectly elastic supply curve
- D. perfectly inelastic supply curve
Explanation: An individual perfectly competitive firm is too small to affect the market price, so it faces a horizontal, perfectly elastic demand curve…
Correct answer: perfectly elastic demand curve- A. has failed
- B. works well in Utopia
- C. is widely used in sub Saharan Africa
- D. is the only way to eradicate poverty?
Explanation: Horvat’s historical assessment was that market or decentralized socialism had generally failed to provide a workable alternative in…
Correct answer: has failed- A. market socialism
- B. capitalism
- C. mixed economy
- D. monopoly
Explanation: Oskar Lange’s model was market socialism: markets guide allocation, while social ownership distributes returns from productive assets more…
Correct answer: market socialism- A. most resource lack freedom to move to their highest value uses
- B. resources are free to move to their lowest cost uses
- C. resources owned by private entities moves to efficient use but not those owned publicly
- D. resources are privately owned by capitalists
Explanation: Central planning commonly restricts resource mobility because administrative controls determine production and allocation rather than…
Correct answer: most resource lack freedom to move to their highest value uses- A. The monopoly profit maximization rule applies
- B. Product price equals marginal cost
- C. marginal revenue equals average cost
- D. total revenue equals total cost
Explanation: In Lange's socialist model, enterprises use the efficiency rule of producing where price equals marginal cost, ensuring that the value of…
Correct answer: Product price equals marginal cost- A. The amount of brain drain
- B. Marginal utility
- C. Marginal Product
- D. The substitutability of labor to capital
Explanation: In a competitive labor market, a worker’s wage equals the value of the marginal product of labor, meaning the extra revenue generated by…
Correct answer: Marginal Product- A. an elastic good
- B. an inferior good
- C. a normal good
- D. a luxury good
Explanation: A negative income elasticity means demand falls as income rises, which is the definition of an inferior good.
Correct answer: an inferior good637. If there is excess capacity in a production facility it is likely that the firm's supply curve is ?
- A. price inelastic
- B. none of these
- C. unit price elastic
- D. price elastic
Explanation: Excess capacity means the firm can increase output substantially without quickly encountering capacity constraints, so its supply is…
Correct answer: price elastic- A. increase total revenue to farmers as a whole because the demand for food is elastic
- B. increase total revenue to farmers as whole because the demand for food is inelastic
- C. reduce total revenue to farmers as a whole because the demand for food is elastic
- D. reduce total revenue to farmers as a whole because the demand for food is inelastic
Explanation: Food demand is generally price inelastic, so a technology-driven increase in supply causes price to fall proportionately more than…
Correct answer: reduce total revenue to farmers as a whole because the demand for food is inelastic- A. demand is price inelastic
- B. supply is price elastic
- C. supply is price inelastic
- D. demand is price elastic
Explanation: A fall in supply raises price, and total revenue rises when the percentage increase in price exceeds the percentage decrease in quantity…
Correct answer: demand is price inelastic- A. the quantity supplied is sensitive to changes in the price of that good
- B. That quantity demanded is insensitive to changes in the price of that good
- C. the quantity demanded is sensitive to changes in the price of that good
- D. the quantity supplied is incentive to changes in the price of that good
- E. None of these
Explanation: Price elasticity of supply measures how much quantity supplied responds to a change in the good’s own price.
Correct answer: the quantity supplied is sensitive to changes in the price of that good