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 54 of 88
- A. Equals the demand curve
- B. Is parallel with the demand curve
- C. Lies below and converges with the demand curve
- D. Lies below and diverges from the demand curve
Explanation: A monopolist must lower its price to sell additional output, so marginal revenue lies below the demand curve.
Correct answer: Lies below and diverges from the demand curve- A. The section with the richest people
- B. The section with the oldest people
- C. The section with the most inelastic demand
- D. The section with the most elastic demand
Explanation: Price discrimination is most profitable where buyers are least responsive to price, because demand is inelastic and quantity falls…
Correct answer: The section with the most inelastic demand- A. some degree of monopoly power
- B. an ability to separate the market
- C. an ability to prevent reselling
- D. all of the above
Explanation: Price discrimination requires market power, separate identifiable market segments, and the ability to stop buyers in the low-price segment…
Correct answer: all of the above- A. marginal revenue equals average total cost
- B. Price equals marginal revenue
- C. marginal revenue equals marginal cost
- D. total revenue equals total cost
Explanation: A profit-maximizing firm expands output while the extra revenue exceeds the extra cost and stops where marginal revenue equals marginal…
Correct answer: marginal revenue equals marginal cost- A. One seller of the product
- B. low barriers to entry
- C. close substitute products
- D. perfect information
Explanation: Pure monopoly has a single seller and strong barriers that prevent other firms from entering.
Correct answer: One seller of the product- A. there is some barrier to entry to that market
- B. Potential competitors sometimes don't notice the the profits.
- C. the monopolist is financially powerful.
- D. antitrust laws eliminate competitors for a specified number of years.
- E. of all of the things described in these answers
Explanation: Long-run economic profits can persist only when entry is blocked by barriers such as patents, legal restrictions, control of key…
Correct answer: there is some barrier to entry to that market- A. Perfect price discrimination generates a deadweight loss
- B. Price discrimination can raise economic welfare.
- C. price discrimination requires that seller be able to separate buyers according to their willingness to pay.
- D. Price discrimination increases a monopolist's profits.
- E. For a monopolist to engage in price discrimination buyers must be unable to engage in arbitrage.
Explanation: Perfect price discrimination eliminates deadweight loss by allowing the monopolist to sell every unit for which willingness to pay covers…
Correct answer: Perfect price discrimination generates a deadweight loss- A. Increase competition in an industry by preventing mergers and breaking up large firms.
- B. regulate the prices charged by a monopoly
- C. increase merger activity to help generate synergies that reduce costs and raise efficiency.
- D. create public ownership of natural monopolies
- E. all of these answers
Explanation: Antitrust laws aim to protect competition by restricting anticompetitive mergers, conduct, and excessive market power, and may break up…
Correct answer: Increase competition in an industry by preventing mergers and breaking up large firms.- A. does not exist
- B. is the marginal cost curve above average variable cost?
- C. is the marginal cost curve above average total cost
- D. is the upward-sloping portion of the average total cost curve
- E. The upward-sloping portion of the average variable cost
Explanation: A monopolist has no unique supply curve because its output depends on both marginal revenue and marginal cost, and marginal revenue…
Correct answer: does not exist- A. underproduction of the good
- B. the monopoly's profits
- C. the monopoly's losses
- D. overproduction of the good
Explanation: A monopolist restricts output below the efficient competitive level, creating deadweight loss because some mutually beneficial units are…
Correct answer: underproduction of the good- A. Thomson has a legally protected exclusive right to produce this textbook
- B. Thomson owns a key resource in the production of textbooks.
- C. Thomson is a natural monopoly,
- D. Thomson is a very large company
Explanation: A textbook publisher can hold a legally protected copyright, giving it an exclusive right to publish that particular work for a specified…
Correct answer: Thomson has a legally protected exclusive right to produce this textbook- A. In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost.
- B. In competitive markets price equals marginal cost, in monopolized markets price equals marginal cost
- C. In competitive markets price exceeds marginal cost, in monopolized markets price exceeds marginal cost
- D. In competitive markets price exceeds marginal cost in monopolized markets price equals marginal cost
Explanation: A competitive firm takes price as given and produces where price equals marginal cost.
Correct answer: In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost.- A. A single firm is very large
- B. The government gives a single firm the exclusive right to produce some good
- C. The costs of production make a single producer more efficient than a large number of productions
- D. A key resource is owned by a single firm
Explanation: A single firm's large size is usually a result of monopoly, not a barrier that prevents entry.
Correct answer: A single firm is very large- A. The price is greater than the marginal cost
- B. The price is greater than the marginal benefit
- C. The price is greater than the average revenue
- D. The price is greater than the marginal revenue
Explanation: Monopoly creates deadweight loss because it restricts output until price exceeds marginal cost.
Correct answer: The price is greater than the marginal cost- A. There are many buyers and sellers
- B. There is one main buyer
- C. There is one main seller
- D. The actions of one firm do not affect the market price and quantity
Explanation: A monopoly has one dominant seller supplying the market, usually protected by barriers to entry.
Correct answer: There is one main seller- A. Patents
- B. Internal economies of scale
- C. Mobility of resources
- D. High investment costs
Explanation: Mobility of resources helps firms enter or adjust production, so it is not an entry barrier.
Correct answer: Mobility of resources- A. The price is greater than the marginal cost
- B. The price is greater than the average cost
- C. Costs are higher than they could be due to a lack of competitive pressure
- D. There are external cost
Explanation: X-inefficiency means a firm fails to minimise its production costs, often because weak competitive pressure permits waste or managerial…
Correct answer: Costs are higher than they could be due to a lack of competitive pressure- A. Advertising manipulates people's tastes to create a desire that otherwise would not exist
- B. Advertising increase competition Which causes unnecessary bankruptcies and layoffs.
- C. Advertising increases brand loyalty causes demand to be more inelastic and thus, increase mark-up over marginal cost.
- D. All of these answers are criticisms of advertising and brand names
Explanation: The standard criticisms are that advertising manipulates preferences and that brand loyalty makes demand less elastic, allowing higher…
Correct answer: Advertising increase competition Which causes unnecessary bankruptcies and layoffs.- A. the producer of a highly differentiated consumer product
- B. the manufacturer of an undifferentiated consumer commodity
- C. a perfect competitor
- D. The manufacturer of an industrial product
- E. The producer of a low-quality product that costs the same to produce as a similar high-quality product
Explanation: Highly differentiated consumer products benefit strongly from persuasion and brand recognition, so producers have an incentive to…
Correct answer: the producer of a highly differentiated consumer product- A. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market
- B. Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms.
- C. Monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.
- D. The products are differentiated in a monopolistically competitive market just like in a competitive market.
Explanation: The competition refers to the presence of many firms and relatively free entry and exit, as in competitive markets.
Correct answer: there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market