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 41 of 88
- A. The quantity of labour supplied will exceed the quantity of labour demanded and there will be Unemployment
- B. Unions will likely Strike and the wage will fall to equilibrium
- C. The quantity of labour demanded will exceed the quantity of labour supplied and there will be a labour shortage
- D. The quality of workers in the applicant pool will tend to fall
Explanation: When the wage is above equilibrium, more people want to work than firms want to hire. The resulting excess supply of labour is unemployment.
Correct answer: The quantity of labour supplied will exceed the quantity of labour demanded and there will be Unemployment- A. Help all teenagers because they receive a higher wage than they would otherwise
- B. have no impact on unemployment as long as it is set above the competitive equilibrium wage
- C. Create more Unemployment is high-skill job markets than in low-skill job markets
- D. Create more unemployment in low-skill job markets than in high-skill job markets
Explanation: Minimum-wage workers are concentrated in low-skill labour markets, where a binding wage floor commonly creates a larger employment…
Correct answer: Create more unemployment in low-skill job markets than in high-skill job markets- A. People lack information
- B. People do not want to work
- C. People do not have the right skills to work
- D. People cannot afford to move location
Explanation: Occupational immobility occurs when workers cannot move between occupations because they lack the required qualifications or skills.
Correct answer: People do not have the right skills to work- A. Wages are a small proportion of total costs
- B. Demand for the final product is price elastic
- C. It is easy to replace labour
- D. Capital is a good substitute for labour
Explanation: Labour demand is less responsive to wage changes when wages form only a small share of total costs, because labour-cost changes have…
Correct answer: Wages are a small proportion of total costs- A. A lower equilibrium wage and lower quantity of labour
- B. A lower equilibrium wage and higher quantity of labour
- C. A higher equilibrium wage and higher quantity of labour
- D. A higher equilibrium wage and lower quantity of labour
Explanation: A decrease in labour supply shifts the supply curve leftward. The new equilibrium has a higher wage but a lower quantity of labour employed.
Correct answer: A higher equilibrium wage and lower quantity of labour- A. Unemployment due to unions
- B. Unemployment due to efficiency wages
- C. Frictional Unemployment
- D. Unemployment due to minimum-wage laws
Explanation: Frictional unemployment exists because workers take time to search for and match with suitable jobs, even when wages are at the…
Correct answer: Frictional Unemployment- A. Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities
- B. Firms do not have a choice about whether they pay efficiency wages or not because these wages are determined by law
- C. Paying the lowest possible wage is always the most efficient (Profitable)
- D. Paying above the competitive equilibrium wage may improve worker health lower worker turnover improve worker quality and increase worker effort
Explanation: Efficiency-wage theory explains above-equilibrium pay through benefits such as better worker health, lower turnover, improved applicant…
Correct answer: Paying above the competitive equilibrium wage may improve worker health lower worker turnover improve worker quality and increase worker effort- A. of minimum wage laws
- B. There are changes in the demand for labour among different firms.
- C. Of unions
- D. All of these answers
- E. Efficiency wages may hold the wage
Explanation: Frictional unemployment arises while workers move between jobs or firms adjust their hiring, so some temporary job-search unemployment is…
Correct answer: There are changes in the demand for labour among different firms.- A. Maximum wage the firm is willing to pay
- B. tip necessary to get a waiter to reserve a table
- C. minimum wage the worker is willing to accept
- D. competitive equilibrium wage.
Explanation: A reservation wage is the lowest wage at which a worker is willing to accept a job.
Correct answer: minimum wage the worker is willing to accept- A. Producers are price takers
- B. consumers and producers face the same prices
- C. marginal costs and benefits are equal
- D. prices equal marginal cost and benefit
- E. All of the above
Explanation: In competitive equilibrium, price equals consumers’ marginal benefit and producers’ marginal cost, so the gains from trade are maximised.
Correct answer: All of the above- A. moral hazard
- B. risk aversion
- C. adverse selection
- D. a poor gamble
Explanation: Adverse selection occurs before an insurance contract when people with greater hidden risk are more likely to seek coverage.
Correct answer: adverse selection- A. Assuming other players move first
- B. dominated by the other players
- C. given the strategies of other players
- D. that is a credible threat
Explanation: In a Nash equilibrium, each player’s strategy is optimal given the strategies chosen by all other players.
Correct answer: given the strategies of other players813. When a market is contestable, incumbent firms must __________ to avoid the entry of new competitors?
- A. behave like competitive firms
- B. agree to act together
- C. differentiate their products
- D. practice price discrimination
Explanation: Contestable markets have low barriers to entry and exit, so incumbent firms must keep prices and conduct close to competitive levels to…
Correct answer: behave like competitive firms- A. monopolistic competition
- B. oligopoly
- C. monopoly
- D. unfair competition
Explanation: Monopolistic competition, oligopoly and monopoly are the standard market structures of imperfect competition.
Correct answer: unfair competition- A. inflation occurs
- B. there are externalities
- C. merit goods are produced
- D. there is excess demand
Explanation: Excess demand means buyers want more than sellers are offering at the current price, so some buyers must go without or compete through…
Correct answer: there is excess demand816. A public good ?
- A. Is provided by the government
- B. Is free
- C. Has the properties of being non-excludable and non-diminishable
- D. Gas external costs
Explanation: A public good is normally defined as non-excludable and non-rival, meaning people cannot easily be kept from using it and one person's use…
Correct answer: Has the properties of being non-excludable and non-diminishable- A. Supply is price elastic
- B. Demand is price elastic
- C. Supply is stable
- D. Demand and supply are price inelastic
Explanation: Agricultural demand and supply are often relatively inelastic, so a small harvest or demand change can cause a large price movement.
Correct answer: Demand and supply are price inelastic- A. There is excess equilibrium
- B. There is excess supply
- C. There is excess demand
- D. There is equilibrium
Explanation: A government price fixed above equilibrium is a binding price floor. At that higher price, producers want to sell more while consumers…
Correct answer: There is excess supply819. Income inequality can be high in the free market and should be reduced This is an example of What ?
- A. Judicial economic statement
- B. Positive economic statement
- C. Formative economic statement
- D. Normative economic statement
Explanation: The claim that inequality should be reduced expresses a value judgment about what ought to happen, making it a normative statement.
Correct answer: Normative economic statement- A. increase equilibrium price and quantity
- B. Decrease equilibrium price and quantity
- C. Increase equilibrium price and decrease quantity
- D. Decrease equilibrium price and increase quantity
Explanation: A decrease in demand shifts the demand curve leftward; with supply unchanged, both the equilibrium price and equilibrium quantity fall.
Correct answer: Decrease equilibrium price and quantity