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 53 of 88
- A. The marginal product fall as more units of a variable factor are added to a fixed factor
- B. Marginal utility falls as more unity of a product are consumed
- C. The total product falls as more units of a variable factor are added to a fixed factor
- D. The marginal product increases as more units of a variable factor are added to a fixed factor
Explanation: The law of diminishing returns states that, after a point, adding more units of a variable factor to fixed factors causes marginal product…
Correct answer: The marginal product fall as more units of a variable factor are added to a fixed factor- A. Allocatively inefficient
- B. X inefficient
- C. Consumer inefficient
- D. Productively inefficient
Explanation: A point inside the production possibility frontier means the economy is not using its resources fully or efficiently, so it is…
Correct answer: Productively inefficient- A. Demand
- B. Land
- C. Labour
- D. Capital
Explanation: The basic productive resources are land, labour, capital and entrepreneurship, whereas demand expresses consumers' willingness to buy…
Correct answer: Demand- A. 7As
- B. 10As
- C. 3As
- D. 1A
Explanation: Increasing B from 4 to 5 requires reducing A from 10 to 7, so the opportunity cost of the fifth B is 3 units of A.
Correct answer: 3As- A. An inward shift of the production possibility frontier
- B. A movement along the production possibility frontier
- C. An outward shift of the production possibility frontier
- D. The pivoting of the production possibility frontier
Explanation: When existing resources are reallocated between industries, the economy moves from one point to another along the same production…
Correct answer: A movement along the production possibility frontier- A. Everyone is wealthy
- B. Resources are unemployed
- C. More of one product can only be produced if less of another product is produced
- D. The distribution of income is eqal
Explanation: Productive efficiency occurs on the production possibility frontier, where producing more of one good requires sacrificing some of…
Correct answer: More of one product can only be produced if less of another product is produced- A. adverse selection
- B. moral hazard
- C. social goods
- D. hyperinflation
Explanation: Adverse selection occurs before lending when asymmetric information prevents lenders from distinguishing safe borrowers from risky ones.
Correct answer: adverse selection1048. Money is ?
- A. The value of all coins and currency in circulation at any time
- B. Anything that is generally accepted as a medium of exchange
- C. The same as income
- D. All of the above
Explanation: Money is anything generally accepted for buying goods and services, making it a medium of exchange.
Correct answer: Anything that is generally accepted as a medium of exchange- A. charging different prices on the basis of race
- B. charging different prices for goods with different costs of production
- C. charging different prices based on cost-of-service differences
- D. selling a certain product of given quality and cost per unit at different prices to different buyers
Explanation: Price discrimination occurs when the same product of identical quality and cost is sold to different buyers at different prices.
Correct answer: selling a certain product of given quality and cost per unit at different prices to different buyers- A. charge a higher price
- B. produce a lower quantity of the product
- C. make a greater amount of economic profit
- D. all of the above
Explanation: A monopolist restricts output to raise price, so it generally charges more and produces less than a perfectly competitive industry.
Correct answer: all of the above- A. the price is greater than the marginal revenue
- B. the price is less than the marginal revenue
- C. there is no relation
- D. they are equal
Explanation: A monopolist faces a downward-sloping demand curve, so selling an additional unit requires lowering the price and reduces revenue on…
Correct answer: the price is greater than the marginal revenue- A. increase should
- B. decrease output
- C. keep output the same because profits are maximized when marginal revenue exceeds marginal cost
- D. raise the price
Explanation: When marginal revenue exceeds marginal cost, producing one more unit adds more to revenue than to cost, so profit rises.
Correct answer: increase should- A. will rise
- B. will fall
- C. will remain the same
- D. could either rise or fall depending on the elasticity of the monopolist's supply curve
Explanation: A natural monopoly exists because one large firm can produce at lower average cost through economies of scale.
Correct answer: will rise- A. tends to be inefficient.
- B. usually lowers the cost of production dramatically.
- C. creates synergies between the newly acquired firm and other government-owned companies.
- D. does none of the things described in these answers
Explanation: Public ownership can reduce some monopoly problems but often suffers from weak competitive pressure and bureaucratic inefficiency.
Correct answer: tends to be inefficient.- A. higher prices and lower output
- B. higher prices and higher output
- C. lower prices and lower output
- D. lower prices and higher output
Explanation: A monopoly restricts output below the competitive level and uses the resulting scarcity to charge a higher price.
Correct answer: higher prices and lower output- A. marginal revenue equals marginal cost
- B. marginal revenue equals price
- C. marginal cost equals price
- D. marginal cost equals demand
- E. none of these answers
Explanation: Profit changes by marginal revenue minus marginal cost when output changes by one unit.
Correct answer: marginal revenue equals marginal cost- A. natural monopoly
- B. perfect competitor
- C. government monopoly
- D. regulated monopoly
Explanation: When average total cost keeps falling over the entire market demand, one large firm can supply the market more cheaply than several…
Correct answer: natural monopoly- A. Bans monopolies
- B. Fines all monopolies
- C. Prevents firms acquiring more than 25% of the market
- D. Has the right to investigate monopolies and will assess each one on its own merits
Explanation: UK competition policy does not automatically ban or fine every monopoly, nor does it impose a universal 25% market-share limit.
Correct answer: Has the right to investigate monopolies and will assess each one on its own merits- A. Monopolies are inefficient
- B. Monopoly profits ac as an incentive for innovation
- C. Monopolies are alocatively efficient
- D. Monopolies are productively efficient
Explanation: Schumpeter argued that monopoly profits can provide funds and incentives for research, development and innovation.
Correct answer: Monopoly profits ac as an incentive for innovation- A. The firm is Productively efficient
- B. The firm is allocatively inefficient
- C. The firm produces where marginal cost is less than marginal revenue
- D. The firm produces at the socially optimal level
Explanation: A monopolist maximises profit where marginal revenue equals marginal cost, but price exceeds marginal cost.
Correct answer: The firm is allocatively inefficient