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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- A. free market solutions are efficient
- B. free market solutions maximize total surplus
- C. all of these answers
- D. free market solutions are equitable
- E. free market solutions are efficient and free market solutions maximize total surplus
Explanation: With rational buyers and no market failure, competitive market decisions maximize total surplus and achieve efficiency.
Correct answer: free market solutions are efficient and free market solutions maximize total surplus- A. maximizes total surplus
- B. generates equality among the members of society
- C. minimizes total surplus
- D. both maximizes total surplus and generates equality among the members of society
Explanation: Smith's invisible hand describes how competition can coordinate self-interested decisions toward an efficient allocation that maximizes…
Correct answer: maximizes total surplus- A. none of these answers.
- B. the minimum amount the seller is willing to accept for a good
- C. the seller's producer surplus
- D. the maximum amount the seller is willing to accept for a good
- E. the seller's consumer surplus
Explanation: A seller's cost is the minimum amount the seller would accept because selling below cost would create a loss.
Correct answer: the minimum amount the seller is willing to accept for a good- A. total surplus is maximized
- B. the value placed on the last unit production by buyers exceeds the cost of production.
- C. producer surplus is maximized
- D. the cost of production on the last unit produced exceeds the value placed on it by buyers.
- E. consumer surplus is maximized
Explanation: At the equilibrium quantity, the value of the marginal unit equals its marginal cost.
Correct answer: the value placed on the last unit production by buyers exceeds the cost of production.- A. improves the material welfare of the buyers.
- B. decrease consumer surplus
- C. improves market efficiency.
- D. increase consumer surplus.
Explanation: A higher price reduces the surplus buyers receive because they pay more while their willingness to pay remains unchanged along the…
Correct answer: decrease consumer surplus- A. minimum amount they are willing to pay for a good
- B. producer surplus.
- C. consumer surplus
- D. maximum amount they are willing to pay for a good
- E. none of these answers
Explanation: Willingness to pay is the maximum amount a buyer would give for a good.
Correct answer: maximum amount they are willing to pay for a good1387. Medical care clearly enhance people's lives. Therefore, we should consume medical care until ?
- A. everyone has as much as they would like
- B. the benefit buyers place on medical care is equal to the cost of producing it
- C. buyers receive no benefit from another unit of medical care.
- D. we must cut back on the consumption of other goods.
Explanation: Consumption should continue while the marginal benefit of another unit exceeds its marginal cost.
Correct answer: the benefit buyers place on medical care is equal to the cost of producing it- A. the market allocates buyers to the sellers who can produce the good at least cost
- B. all these answers
- C. none of these answers
- D. the quantity produced in the market maximizes the sum of consumer and producer surplus
- E. the market allocates output to the buyers that value it the most
Explanation: Efficiency requires both producing at the lowest possible cost and allocating goods to buyers who value them most.
Correct answer: all these answers- A. choose a price below the market equilibrium price
- B. allow the market to seek equilibrium on its own.
- C. Choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).
- D. choose a price above the market equilibrium price
Explanation: In a competitive market, equilibrium quantity maximizes the combined benefits of buyers and sellers because marginal benefit equals…
Correct answer: allow the market to seek equilibrium on its own.- A. increase producer surplus
- B. does all the things describe in these answers
- C. decrease producer surplus
- D. improves market equity
Explanation: With the supply curve fixed, a higher price increases the amount sellers receive above their minimum acceptable prices.
Correct answer: increase producer surplus- A. above the supply curve and below the price
- B. below the demand curve and above the price
- C. below the demand curve and above the supply curve
- D. below the supply curve and above the price
- E. above the demand curve and below the price
Explanation: Total surplus combines consumer surplus and producer surplus, so it is the area between the demand curve, which shows value, and the…
Correct answer: below the demand curve and above the supply curve- A. the value placed on the last unit of production by buyers exceeds the cost of production
- B. the cost of production on the last unit produced exceeds the value placed on it by buyers.
- C. consumer surplus is maximized
- D. total surplus is maximized
- E. producer surplus is maximized
Explanation: Beyond equilibrium quantity, the cost of producing the next unit is greater than the value buyers place on it.
Correct answer: the cost of production on the last unit produced exceeds the value placed on it by buyers.- A. Three vases will be sold, and consumer surplus is Rs80
- B. One vase will be sold, and consumer surplus is Rs5.
- C. One vase will be sold, and consumer surplus is Rs30.
- D. Three vases will be sold, and consumer surplus is Rs0.
- E. Two vases will be sold, and consumer surplus is Rs5.
Explanation: At Rs25, buyers 1 and 2 purchase because their willingness to pay is at least the price, while buyer 3 does not.
Correct answer: Two vases will be sold, and consumer surplus is Rs5.- A. Rs18,000
- B. Rs20,000
- C. Rs2,000
- D. Rs0.
Explanation: Consumer surplus equals willingness to pay minus the actual price paid: Rs20,000 − Rs18,000 = Rs2,000.
Correct answer: Rs2,000- A. below the demand curve and above the price.
- B. above the supply curve and below the price.
- C. above the demand curve and below the price.
- D. below the supply curve and above the price.
- E. below the demand curve and above the supply curve
Explanation: Consumer surplus is the benefit buyers receive above the market price, represented by the area below the demand curve and above the price…
Correct answer: below the demand curve and above the price.- A. 5 percent
- B. 10 percent
- C. 15 percent
- D. 20 percent
Explanation: Effective protection equals the tariff on final output divided by the share of domestic value added: 10% ÷ (1 − 0.5) = 20%.
Correct answer: 20 percent- A. never
- B. sometimes
- C. always
- D. None of these
Explanation: A large country can sometimes gain from a tariff because reduced import demand may lower the foreign export price and improve its terms of…
Correct answer: sometimes- A. the domestic price of the product will increase by more than the tariff itself
- B. The domestic price of the product will increase by the same amount as the tariff
- C. The domestic price of the product will increase by less than the tariff
- D. None of the above
Explanation: For a large country, the tariff reduces its import demand and can force foreign exporters to lower their price.
Correct answer: The domestic price of the product will increase by less than the tariff- A. scientific tariff argument
- B. infant industry argument
- C. beggar they neighbor argument
- D. foreign dumping argument
Explanation: The infant-industry argument supports temporary protection for new domestic industries until they develop economies of scale, skills, and…
Correct answer: infant industry argument- A. a revenue effect and redistribution effect
- B. revenue effect and protection effect
- C. consumption effect and protection effect
- D. redistribution effect and consumption effect
Explanation: A prohibitive tariff eliminates imports, so the government collects no tariff revenue.
Correct answer: consumption effect and protection effect