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. people are greedy
- B. productive resources are limited
- C. human beings are inherently insecure
- D. people are irrational
Explanation: Human wants continue to expand, while productive resources such as land, labor, and capital are limited.
Correct answer: productive resources are limited- A. look for and pursue opportunities to increase their utility
- B. generally disregard the interests of others
- C. are mainly creatures of habit
- D. are unpredictable
Explanation: Rational self-interest means seeking choices and opportunities expected to increase personal utility, or satisfaction.
Correct answer: look for and pursue opportunities to increase their utility1703. In economics, the pleasure, happiness, or satisfaction received from a product is called ______?
- A. marginal cost
- B. rational outcome
- C. status fulfillment
- D. utility
Explanation: Utility is the satisfaction or pleasure a consumer receives from consuming a good or service.
Correct answer: utility- A. versatility and flexibility
- B. rationality
- C. pleasure and satisfaction
- D. purposefulness
Explanation: In economics, utility means the satisfaction or pleasure obtained from consuming a good or service.
Correct answer: pleasure and satisfaction- A. J.P Kense
- B. David Ricordo
- C. Adam Smith
- D. Mankew
Explanation: Adam Smith is commonly called the father of modern economics because his 1776 work The Wealth of Nations systematically discussed markets…
Correct answer: Adam Smith- A. Rotates outward toward the cheaper good
- B. Shifts outward parallel to itself
- C. Rotates inward away from the cheaper good
- D. Shifts inward parallel to itself
Explanation: A fall in one price increases the maximum amount of that good the consumer can buy, while the other intercept stays unchanged.
Correct answer: Rotates outward toward the cheaper good- A. Equal for all goods purchased
- B. Greater for the most expensive good
- C. Equal to total utility from each good
- D. Greater for the good bought in largest quantity
Explanation: At an interior utility maximum, the marginal utility gained from the last rupee spent is equal across goods.
Correct answer: Equal for all goods purchased- A. Total fixed cost
- B. Total variable cost
- C. Marginal cost
- D. Average variable cost
Explanation: Fixed cost is tied to fixed inputs and does not vary with output in the short run.
Correct answer: Total fixed cost- A. Cannot be recovered after it is incurred
- B. Changes directly with the output level
- C. Is avoided when production temporarily stops
- D. Equals the firm's opportunity cost
Explanation: A sunk cost has already been incurred and cannot be recovered, so it should not affect current production decisions.
Correct answer: Cannot be recovered after it is incurred- A. Differentiated but close substitutes
- B. Identical with no close substitutes
- C. Controlled by a single public authority
- D. Produced under a binding price ceiling
Explanation: Monopolistic competition combines many sellers with product differentiation, such as differences in quality, design or location.
Correct answer: Differentiated but close substitutes- A. Restricting total output and raising price
- B. Expanding total output until price is zero
- C. Making each member a price taker
- D. Removing all barriers to new entry
Explanation: A cartel attempts to act like a monopoly by limiting industry output and charging a higher price.
Correct answer: Restricting total output and raising price- A. A surplus of the product
- B. A shortage of the product
- C. A fall in the legal minimum price
- D. An unchanged quantity supplied and demanded
Explanation: At a price above equilibrium, sellers want to supply more than buyers want to purchase.
Correct answer: A surplus of the product- A. Higher-risk people are more likely to seek coverage
- B. Insured people take greater risks after coverage begins
- C. Insurers reduce premiums after every claim
- D. Low-risk people always receive more compensation
Explanation: Adverse selection arises before an agreement, when people with higher expected losses are more likely to purchase insurance.
Correct answer: Higher-risk people are more likely to seek coverage- A. A consumer's purchase harms a third party
- B. A producer's output benefits another producer
- C. A consumer receives all benefits from a purchase
- D. A firm pays every cost created by production
Explanation: A negative consumption externality imposes an uncompensated cost on someone outside the transaction, such as noise affecting neighbours.
Correct answer: A consumer's purchase harms a third party- A. Each additional worker to add more output than the previous one
- B. Total output to fall below its previous level
- C. Average fixed cost to rise with every worker
- D. The firm's fixed inputs to become variable immediately
Explanation: A rising marginal product means the extra output from each additional worker is increasing.
Correct answer: Each additional worker to add more output than the previous one- A. Minimum price the seller is willing to accept
- B. Maximum price the buyer is willing to pay
- C. Average total cost at the market output
- D. Marginal revenue from the final unit sold
Explanation: Producer surplus is the area or gain received above the minimum price at which producers are willing to supply a product.
Correct answer: Minimum price the seller is willing to accept- A. A smaller percentage in the opposite direction
- B. An equal percentage in the opposite direction
- C. An equal percentage in the same direction
- D. No percentage change in either direction
Explanation: Unitary price elasticity means the absolute percentage change in quantity demanded equals the percentage change in price.
Correct answer: An equal percentage in the opposite direction- A. Decrease because purchasing power falls
- B. Increase because consumers switch between them
- C. Remain unchanged because prices are unrelated
- D. Increase only when both goods are inferior
Explanation: Substitute goods can perform similar functions, so consumers shift toward the relatively cheaper good.
Correct answer: Increase because consumers switch between them- A. Total revenue
- B. Level of output
- C. Total cost
- D. Marginal product
Explanation: An isoquant shows alternative combinations of inputs, such as labour and capital, that yield an equal quantity of output.
Correct answer: Level of output- A. At its maximum
- B. At its minimum
- C. Equal to average fixed cost
- D. Equal to total fixed cost
Explanation: When marginal cost is below average variable cost, it pulls average variable cost down.
Correct answer: At its minimum