Free Microeconomics MCQs with Answers

• A. hire low-income workers
• B. manufacture in nations they have difficult exporting to
• C. obtain necessary factor inputs
• D. All of the above

Explanation: Multinational operations can reduce labor costs, overcome barriers to exporting by producing inside a target market, and secure scarce or…

• A. total wage income in the world
• B. wage disparities
• C. business or capitalist income in the world
• D. the productivity of labor

Explanation: Migration from low-wage to high-wage countries increases labor supply in the destination and reduces it in the origin, tending to narrow…

• A. R&D generating welfare improved technology
• B. development of more productive machinery
• C. new work rules promoting workers efficiency
• D. lower wages extracted from workers

Explanation: Lower wages are mainly a transfer from workers to the firm, not a genuine reduction in resource use or an efficiency gain for the whole…

• A. excludable
• B. a common resource
• C. a public goods
• D. rival

Explanation: A good is excludable when access can be denied to people who do not pay or otherwise qualify.

• A. a firework displays
• B. national defense
• C. iron one
• D. a national park

Explanation: A common resource is rival but difficult to exclude people from using. A national park can become congested or depleted through use, while…

• A. an excludable good.
• B. a private good
• C. a common resource
• D. a public good.

Explanation: A negative externality imposes an outside cost and leads to overuse of a resource, much like the depletion of a common resource in the…

• A. rival good
• B. public good
• C. private good
• D. common resource

Explanation: A positive externality creates benefits for people who are not directly involved in the transaction, resembling the spillover benefits of…

• A. receives the benefits of a good but avoids paying for it.
• B. pays for a good but fails to receive any benefit from the good
• C. fails to produce goods but is allowed to consume goods.
• D. produces a good but fails to receive payment for the good

Explanation: A free rider enjoys the benefits of a good without contributing to its cost.

• A. the rivalness problem
• B. the public goods problem
• C. the Tragedy of the Commons.
• D. The free-rider problem.

Explanation: Public goods are non-excludable, so people can benefit without paying, creating the free-rider problem.

• A. rival but not excludable
• B. neither rival nor excludable
• C. not rival but excludable
• D. both rival and excludable

Explanation: A natural monopoly typically supplies a good or service with high fixed costs and low marginal costs, making consumption largely non-rival…

• A. neither rival nor excludable
• B. rival but not excludable.
• C. both rival but excludable
• D. not rival but excludable

Explanation: A public good is both non-rival, so one person's use does not reduce another's, and non-excludable, so non-payers cannot easily be…

• A. excess baggage
• B. a free rider
• C. a costly rider
• D. a common resource
• E. an unwelcome rider

Explanation: A viewer who receives the benefit of a broadcast while avoiding the licence fee is a free rider.

• A. a good produced by a natural monopoly
• B. a private good
• C. a public good
• D. a common resource

Explanation: A toll makes the road excludable, while congestion makes one driver's use reduce the road space available to others, making it rival.

• A. government regulation
• B. that prices are not low enough so firms over produce
• C. that prices are not high enough, so people overconsume
• D. that property rights have not been well established

Explanation: Efficient markets require clearly defined and enforceable property rights so owners have incentives to use resources efficiently.

• A. rival but not excludable
• B. not rival but excludable
• C. both rival excludable
• D. neither rival nor excludable

Explanation: A private good is both rival and excludable: consumption by one person leaves less for others, and owners can prevent non-payers from…

• A. rival
• B. a good produced by a natural monopoly
• C. a common resource
• D. excludable

Explanation: A good is rival when one person's consumption leaves less available for others.

• A. increasing the wage in the Unionized sector, Which may create a decrease in the supply of workers in the non-unionized sector
• B. Increasing the demand for workers in the Unionized sector
• C. decreasing the demand for workers in the Unionized sector
• D. Increasing the wage in the Unionized sector which may create an increase in the supply of workers in the non-unionized sector

Explanation: A union wage above the competitive level can push some workers into the non-unionised sector, increasing labour supply there and putting…

• A. Raise the wage for insiders above the competitive equilibrium
• B. Lower the wage of local outsiders
• C. Offset the market power of a large firm that is the dominant employer in a region
• D. Threaten a strike but don't actually follow through so there are not lost hours of work

Explanation: A union can improve efficiency by countering the monopsony power of a dominant regional employer, which otherwise may suppress wages and…

• A. At equilibrium wages workers sleep when the boss is not looking because workers are not deeply concerned about being fired
• B. At equilibrium wages workers often quit to find better jobs.
• C. At equilibrium wages only minimally qualified workers apply for the job
• D. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy
• E. All of these answers

Explanation: Efficiency wages can reduce shirking, employee turnover and adverse selection, while higher pay may also help workers afford better…

• A. Establishing worker training Programs
• B. Establishing right-to-work laws
• C. Reducing unemployment benefits
• D. Establishing employment agencies
• E. Raising the minimum wage

Explanation: A binding minimum wage raises labour costs and can reduce the quantity of labour demanded, increasing unemployment among affected workers.