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 59 of 88
- A. monopolistically competitive
- B. a monopoly
- C. an oligopoly
- D. competitive
Explanation: A market dominated by a few major firms, such as the named hand-tool producers, is an oligopoly.
Correct answer: an oligopoly1162. In cartels ?
- A. Each individual firm profit maximizes
- B. There may be an incentive to cheat
- C. The industry as a whole is loss making
- D. There is no need to police agreements
Explanation: Cartel members agree to restrict competition, but each firm can gain extra sales by secretly cutting price or exceeding its quota.
Correct answer: There may be an incentive to cheat1163. In Game Theory ?
- A. Firms are assumed to act independently
- B. Firms are assumed to cooperate with each other
- C. Firms collude as part of cartel
- D. Firms consider the actions of others before deciding what to do
Explanation: Game theory studies decisions in which the payoff to one firm depends on what rival firms do.
Correct answer: Firms consider the actions of others before deciding what to do- A. monopolistic competition
- B. Competitively monopolistic
- C. Duopoly
- D. Oligopoly
Explanation: An oligopoly exists when a small number of firms supply most of a market, giving each firm enough influence that its decisions affect its…
Correct answer: Oligopoly- A. Boys as young as 8 years old tend or herd animals, weed pick and sell produce
- B. Children place more economic demands on a peasant family than an urban family
- C. Major financial security is usually provided by sons
- D. The cost of education entertainment and travel is low
Explanation: In peasant societies, children often contribute labour and provide future support, so they are not usually described as placing greater…
Correct answer: Children place more economic demands on a peasant family than an urban family- A. production possibility curve
- B. marginal inequality curve
- C. sen curve
- D. Lorenz curve
Explanation: A Lorenz curve plots the cumulative share of income received by cumulative population groups and reveals the degree of inequality.
Correct answer: Lorenz curve- A. individuals' accomplishments
- B. individuals' capabilities
- C. individuals' wealth
- D. individuals' education
Explanation: Amartya Sen evaluates welfare mainly through people's capabilities, meaning their real freedoms to achieve valued ways of living.
Correct answer: individuals' capabilities- A. a teenage worker with few qualifications.
- B. A manual worker with fifteen years of work experience
- C. A professional worker with university degree.
- D. All there are equally likely to find it difficult to get a job
Explanation: Teenage workers with few qualifications are more likely to have productivity near the legal minimum, so a higher minimum wage makes…
Correct answer: a teenage worker with few qualifications.- A. the minimum wage
- B. rent controls
- C. restricting petrol prices to Rs100 per litre when the equilibrium price is Rs150 per litre
- D. All of these answers are price floors
Explanation: A price floor is a legal minimum price, and the minimum wage is a minimum price for labour.
Correct answer: the minimum wage- A. the buyers
- B. Neither buyers nor sellers desire a price floor.
- C. the sellers
- D. Both buyers and sellers desire a price floor.
Explanation: Sellers generally favour price floors because a binding floor keeps the market price above equilibrium and can raise the price they…
Correct answer: the sellers1171. A price floor ?
- A. always determines the price at which a good must be sold
- B. sets a legal maximum on the price at which a good can be sold
- C. is not a binding constraint if it is set above the equilibrium price
- D. sets a legal minimum on the price at which a good can be sold
Explanation: A price floor establishes the lowest legal price at which a good or service may be sold.
Correct answer: sets a legal minimum on the price at which a good can be sold- A. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price
- B. a surplus
- C. a shortage
- D. an equilibrium
Explanation: A binding price ceiling is set below equilibrium, so the quantity demanded exceeds the quantity supplied.
Correct answer: a shortage- A. Clothing
- B. food
- C. housing
- D. entertainment
Explanation: Tax incidence falls more heavily on the less elastic side of the market; entertainment is commonly treated as having relatively elastic…
Correct answer: entertainment- A. both supply and demand are inelastic
- B. demand is elastic, and supply are inelastic
- C. both supply and demand are elastic
- D. demand is inelastic, and supply is elastic
Explanation: Buyers bear more of a tax when demand is inelastic and supply is elastic, because buyers reduce their purchases only slightly while…
Correct answer: demand is inelastic, and supply is elastic- A. both supply and demand are elastic
- B. both supply and demand are inelastic
- C. demand is inelastic and supply in elastic
- D. demand is elastic, and supply is inelastic
Explanation: Sellers bear more of a tax when supply is inelastic and demand is elastic, because sellers cannot easily reduce the quantity supplied…
Correct answer: demand is elastic, and supply is inelastic- A. a decrease in the price buyers pay, an increase in the price sellers receive, and a decrease in the quantity sold
- B. an increase in the price buyers pay a decrease in the price sellers receive, and an increase in the quantity sold
- C. a decrease in the price buyers pay, an increase in the price sellers receive and an increase in the quantity sold
- D. an increase in the price buyers pay a decrease in the price sellers receive and a decrease in the quantity sold
Explanation: A tax creates a wedge between the price buyers pay and the lower net price sellers receive, while reducing the quantity traded.
Correct answer: an increase in the price buyers pay a decrease in the price sellers receive and a decrease in the quantity sold- A. supply curve downward by the size of the tax per unit.
- B. Supply curve upward by the size of the tax per unit
- C. demand curve upward by the size of the tax per unit.
- D. demand curve downward by the size of the tax per unit
Explanation: A tax collected from buyers reduces the amount they are willing to pay sellers by the tax per unit, so the demand curve shifts downward by…
Correct answer: demand curve downward by the size of the tax per unit- A. A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint.
- B. A significant increase in the supply for petrol could cause the price ceiling to become a binding constraint.
- C. There will be a shortage of petrol
- D. There will be surplus of petrol
Explanation: At Rs150, the ceiling is above the Rs100 equilibrium price, so it is initially nonbinding.
Correct answer: A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint.- A. demand is inelastic and supply in elastic
- B. supply is inelastic, and demand is elastic
- C. both supply and demand are elastic
- D. both supply and demand are inelastic
Explanation: A binding price floor creates a surplus because quantity supplied exceeds quantity demanded.
Correct answer: both supply and demand are elastic- A. The shortage created by the price ceiling is greater in the short ran than in the long run.
- B. The surplus created by the price ceiling is greater in the short run than in the long run
- C. The surplus created by the price ceiling is greater in the long run than in the short run
- D. The shortage created by the price ceiling is greater in the long run than in the short run
Explanation: A binding ceiling creates a shortage, and both demand and supply generally become more responsive over time.
Correct answer: The shortage created by the price ceiling is greater in the long run than in the short run