Market MCQs

Option A: externality

Option B: market imperfection

Option C: deadweight burden

Option D: free rider

Correct Answer: free rider ✔

Option A: public transport

Option B: the national health service

Option C: national defence

Option D: rail transport

Correct Answer: national defence ✔

Option A: imperfect competition

Option B: taxation

Option C: externalities

Option D: missing markets

Correct Answer: all of the above ✔

Option A: a production externality

Option B: a second-best solution

Option C: transaction costs

Option D: a consumption externality

Correct Answer: a consumption externality ✔

Option A: Producers are price takers

Option B: consumers and producers face the same prices

Option C: marginal costs and benefits are equal

Option D: prices equal marginal cost and benefit

Correct Answer: All of the above ✔

Option A: moral hazard

Option B: risk aversion

Option C: adverse selection

Option D: a poor gamble

Correct Answer: adverse selection ✔

Option A: Assuming other players move first

Option B: dominated by the other players

Option C: given the strategies of other players

Option D: that is a credible threat

Correct Answer: given the strategies of other players ✔

Option A: behave like competitive firms

Option B: agree to act together

Option C: differentiate their products

Option D: practice price discrimination

Correct Answer: behave like competitive firms ✔

Option A: monopolistic competition

Option B: oligopoly

Option C: monopoly

Option D: unfair competition

Correct Answer: unfair competition ✔

Option A: is the way in which a tax is structured

Option B: is the ultimate distribution of a tax’s burden

Option C: occurs when taxes cause prices to increase but wages to fall

Option D: occurs when house hold can alter their behaviour and do something to avoid paying a tax.

Correct Answer: occurs when house hold can alter their behaviour and do something to avoid paying a tax. ✔

Option A: Negative externalies

Option B: Positive externalities

Option C: Monopolies

Option D: Oligopolies

Correct Answer: Positive externalities ✔

Option A: This tax will not raise much revenue either in the short term or the long term since demand is price inelastic

Option B: The tax on cigarettes may not raise as much revenue as anticipated in the years to com because the demand for cigarettes is likely to become more elastic over time.

Option C: This a very good way to raise revenue both in the short term and in the long term, because there are no substitutes for cigarettes.

Option D: No tax revenue can be raised in this way because sellers of cigarette will just lower their price by the amount of the tax and therefore, the price of cigarettes to consumers will not change

Correct Answer: The tax on cigarettes may not raise as much revenue as anticipated in the years to com because the demand for cigarettes is likely to become more elastic over time. ✔

Option A: VAT

Option B: inheritance tax

Option C: income tax

Option D: a tax on profits

Correct Answer: VAT ✔

Option A: wages in general would fall as employers tried to hold down costs

Option B: fewer young workers would be employed

Option C: the costs and prices of firms employing cheap labour would increase

Option D: there would be more unemployment

Correct Answer: the costs and prices of firms employing cheap labour would increase ✔

Option A: price

Option B: quantity

Option C: demand

Option D: supply

Correct Answer: supply ✔

Option A: inflation occurs

Option B: there are externalities

Option C: merit goods are produced

Option D: there is excess demand

Correct Answer: there is excess demand ✔

Option A: A price fall

Option B: A price increase

Option C: Excess supply

Option D: Excess demand

Correct Answer: Excess supply ✔

Option A: Is provided by the government

Option B: Is free

Option C: Has the properties of being non-excludable and non-diminishable

Option D: Gas external costs

Correct Answer: Has the properties of being non-excludable and non-diminishable ✔

Option A: Supply is price elastic

Option B: Demand is price elastic

Option C: Supply is stable

Option D: Demand and supply are price inelastic

Correct Answer: Demand and supply are price inelastic ✔

Option A: There is excess equilibrium

Option B: There is excess supply

Option C: There is excess demand

Option D: There is equilibrium

Correct Answer: There is excess supply ✔

Option A: The social marginal costs are higher than the private marginals costs

Option B: A product is not provided in the free market

Option C: The social marginal cost equal the social marginal benefit

Option D: The social marginal benefits are higher than the private marginal benefits

Correct Answer: The social marginal costs are higher than the private marginals costs ✔

Option A: Judicial economic statement

Option B: Positive economic statement

Option C: Formative economic statement

Option D: Normative economic statement

Correct Answer: Normative economic statement ✔

Option A: increase equilibrium price and quantity

Option B: Decrease equilibrium price and quantity

Option C: Increase equilibrium price and decrease quantity

Option D: Decrease equilibrium price and increase quantity

Correct Answer: Decrease equilibrium price and quantity ✔

Option A: The price elasticity of supply is + 3

Option B: The price elasticity of supply is + 0.2

Option C: The price elasticity of supply is + 2

Option D: The price elasticity of supply is infinity

Correct Answer: The price elasticity of supply is + 2 ✔

Option A: Signal

Option B: Incentive

Option C: Rationing device

Option D: Indicator of income

Correct Answer: Indicator of income ✔

Option A: Act as a signal

Option B: Act as a incentive

Option C: Act as a rationing device

Option D: shift the demand curve

Correct Answer: shift the demand curve ✔

Option A: Shifts the supply curve

Option B: shifts the demand curve

Option C: Leads to a contractions in supply

Option D: Leads to an extension of supply

Correct Answer: Shifts the supply curve ✔

Option A: Excess supply

Option B: Excess demand

Option C: Equilibrium

Option D: Downward pressure on prices

Correct Answer: Excess demand ✔

Option A: income elastic

Option B: income inelastic

Option C: Price elastic

Option D: Price inelastic

Correct Answer: Price inelastic ✔

Option A: Lead to a movement along the demand curve

Option B: Shift the supply curve

Option C: Shift the demand curve

Option D: Lead to an extension of demand

Correct Answer: Shift the demand curve ✔

Option A: decrease in supply

Option B: increase in demand

Option C: increase in supply

Option D: decrease in demand

Correct Answer: decrease in demand ✔

Option A: There is an increase in the quantity demanded of apples and in the supply for apples

Option B: There is an increase in the demand and supply of apples.

Option C: There is an increase in the demand for apples and a decrease in the supply of apples

Option D: There is a decrease in the quantity demanded of apples and an increase in the supply for apples

Correct Answer: There is an increase in the demand for apples and an increase in the quantity supplied of apples. ✔

Option A: Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall

Option B: The supply of lettuce will decrease

Option C: The demand for lettuce will decrease

Option D: The equilibrium price and quantity of salad dressing will fall

Correct Answer: The equilibrium price and quantity of salad dressing will fall ✔

Option A: the equilibrium quantity to rise and the equilibrium price to rise

Option B: the equilibrium quantity to rise and the equilibrium price to fall

Option C: the equilibrium quantity to rise and the equilibrium price to remain constant

Option D: the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise

Correct Answer: the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. ✔

Option A: an increase in the equilibrium price and quantity

Option B: none of these answers

Option C: an increase in the equilibrium price and a decrease in the equilibrium quantity

Option D: a decrease in the equilibrium quantity.

Correct Answer: a decrease in the equilibrium price and quantity. ✔

Option A: there is a shortage and the price will rise

Option B: the quantity demanded is equal to the quantity supplied and the price remains unchanged

Option C: there is a shortage and the price will fall

Option D: there is a surplus and the price will rise

Correct Answer: there is a shortage and the price will rise ✔

Option A: an advance in the technology used to manufacture watches

Option B: an increase in the price of watches

Option C: All of these answers cause an increase in the supply of watches

Option D: a decrease in the wage of workers employed to manufacture watches

Correct Answer: an increase in the price of watches ✔

Option A: many buyers and sellers

Option B: none of these answers

Option C: firms that are price takers

Option D: only one seller

Correct Answer: only one seller ✔

Option A: none of these answers

Option B: increases the quantity supplied of that good

Option C: increase the supply of that good

Option D: decrease the demand for the good

Correct Answer: increases the quantity supplied of that good ✔

Option A: Complements

Option B: inferior goods

Option C: normal goods

Option D: none of these answers

Correct Answer: Substitutes ✔

Option A: increasing average cost curve, marginal cost lies above average cost

Option B: increasing average cost curve, marginal cost lies below average cost

Option C: decreasing average cost curve marginal cost lies above average cost

Option D: decreasing average cost curve, marginal cost lies below average cost

Correct Answer: decreasing average cost curve, marginal cost lies below average cost ✔

Option A: vertical merger

Option B: horizontal merger

Option C: conglomerate merger

Option D: hostile takeover

Correct Answer: horizontal merger ✔

Option A: marginal cost is set equal to marginal revenue

Option B: price is less than marginal cost

Option C: marginal consumer benefit is less than marginal revenue

Option D: there is too little output at too high a cost

Correct Answer: there is too little output at too high a cost ✔

Option A: reduce , reduce

Option B: increase, increase

Option C: increase, reduce

Option D: reduce, increase

Correct Answer: increase, reduce ✔

Option A: marginal costs, marginal benefits

Option B: demand, supply

Option C: marginal cost, marginal revenue

Option D: marginal cost, average cost

Correct Answer: marginal costs, marginal benefits ✔

Option A: imperfect competition popular

Option B: externalities , distortionary

Option C: inequality , a first best option

Option D: poor health, unnecessary

Correct Answer: externalities , distortionary ✔

Option A: Private good

Option B: merit good

Option C: public good

Option D: abundant good

Correct Answer: public good ✔

Option A: externalities

Option B: the free-rider problem

Option C: a and b

Option D: a and c

Correct Answer: a and b ✔

Option A: private costs, private benefits

Option B: private costs, social costs or benefits

Option C: social costs, social benefit

Option D: insiders, outsiders

Correct Answer: private costs, social costs or benefits ✔

Option A: the marginal cost of production does not equal society’s marginal benefit

Option B: the distribution is inequitable

Option C: economic growth is low

Option D: unemployment is high

Correct Answer: A. the marginal cost of production does not equal society’s marginal benefit ✔

Option A: some people can’t count

Option B: some people may not be permanent resident

Option C: not all economic activity is legal

Option D: We can’t make value judgments to compare different people’s welfare

Correct Answer: D. We can’t make value judgments to compare different people’s welfare ✔

Option A: worse off; worse off

Option B: better off; better off

Option C: better off; worse off

Option D: equal, unequal

Correct Answer: better off; worse off ✔

Option A: reduces the likelihood

Option B: increases the likelihood

Option C: guarantees

Option D: none of the above

Correct Answer: increases the likelihood ✔

Option A: a wining strategy

Option B: a losing strategy

Option C: a players best strategy when moving first

Option D: a player’s best strategy whatever the strategies adopted by rivals

Correct Answer: D. a player’s best strategy whatever the strategies adopted by rivals ✔

Option A: players are better of to act independently

Option B: monopoly is better than competition

Option C: people will always cheat

Option D: players are better off if they co-operate

Correct Answer: players are better off if they co-operate ✔

Option A: The oligopolist believes that competitors will match output increase but not output reduction

Option B: The oligopolist believes that competitors will match price increase but not output reduction

Option C: The oligopolist believers that competitors will match price cuts but not price rises

Option D: The oligopolist believes that competitors will match price increase but not output increase

Correct Answer: The oligopolist believers that competitors will match price cuts but not price rises ✔

Option A: long run marginal cost

Option B: short run marginal cost

Option C: long run average cost

Option D: long run marginal cost

Correct Answer: long run average cost ✔

Option A: research

Option B: cost-saving

Option C: technical advance

Option D: all of the above

Correct Answer: all of the above ✔

Option A: produce less at a lower price

Option B: produce more at a lower price

Option C: produce less at a higher price

Option D: produce less at a lower price

Correct Answer: produce less at a higher price ✔

Option A: Whether there is perfect or imperfect information

Option B: elasticities of demand and supply

Option C: how many producers there are:

Option D: who is legally obliged to pay the tax

Correct Answer: elasticities of demand and supply ✔

Option A: behaviour of shifting the tax to another party.

Option B: structure of the tax

Option C: ultimate distribution of a tax’s burden.

Option D: measure of the impact the tax has on employment and output

Correct Answer: C. ultimate distribution of a tax’s burden. ✔

Option A: Specific

Option B: Exercise duty

Option C: Direct

Option D: Ad valorem

Correct Answer: Ad valorem ✔

Option A: goods are sold at prices above legal or official price.

Option B: buyers and/or sellers are not paying taxes as they should

Option C: illegal substances are sold

Option D: transactions are not recorded in the GDP figures.

Correct Answer: goods are sold at prices above legal or official price. ✔

Option A: quantity demanded will be greater than quantity supplied

Option B: quantity demanded will be less than quantity supplied

Option C: demand will be less than supply.

Option D: quantity demanded will equal quantity supplied .

Correct Answer: quantity demanded will be greater than quantity supplied ✔

Option A: supply exceeds demand

Option B: a surplus exists

Option C: there is perfectly inelastic demand for the good

Option D: demand exceeds supply

Correct Answer: demand exceeds supply ✔

Option A: a maximum price usually set by government that sellers may charge for a good

Option B: the different between the initial equilibrium price and the equilibrium price after a decrease in supply

Option C: a minimum price usually set by government that sellers must charge for a good

Option D: a minimum price that consumers are willing to pay for a good.

Correct Answer: a maximum price usually set by government that sellers may charge for a good ✔

Option A: The government sells assets to a the private sector

Option B: The government bans a product

Option C: The government takes control of an industry

Option D: The government taxes a product to a raise its price

Correct Answer: The government takes control of an industry ✔

Option A: There is under-consumption in the free market

Option B: There is over consumption in the free market

Option C: The government may tax to decrease production

Option D: Society could be made off it less was produced

Correct Answer: There is under-consumption in the free market ✔

Option A: Supply is price elastic

Option B: Demand is price inelastic

Option C: The government buys up all the excess production

Option D: All output must be sold at a maximum price

Correct Answer: Demand is price inelastic ✔

Option A: Not provided in the free market economy

Option B: Under provided in the free market economy

Option C: Over provided in the free market economy

Option D: Provided free

Correct Answer: Under provided in the free market economy ✔

Option A: There is excess equilibrium

Option B: There is excess supply

Option C: There is excess demand

Option D: There is equilibrium

Correct Answer: There is excess demand ✔

Option A: Be under provided in the free market

Option B: Be over provided in the free market

Option C: Not be provided in the free market

Option D: Has no opportunity cost

Correct Answer: Not be provided in the free market ✔

Option A: Increase equilibrium price and quantity

Option B: Decrease equilibrium price and quantity

Option C: Increase equilibrium price and decrease quantity

Option D: Decrease equilibrium price and increase quantity

Correct Answer: Decrease equilibrium price and increase quantity ✔

Option A: The price elasticity of supply is – 3

Option B: The price elasticity of supply is – 0.2

Option C: The price elasticity of supply is – 2

Option D: The price elasticity of supply is infinity

Correct Answer: A. The price elasticity of supply is – 3 ✔

Option A: The price elasticity of supply is price inelastic

Option B: The price elasticity of supply is price elastic

Option C: The price elasticity of supply is perfectly elastic

Option D: The price elasticity of supply is infinity

Correct Answer: The price elasticity of supply is infinity ✔

Option A: The price consumers are willing to pray for a unit

Option B: The cost of providing a unit

Option C: The profits made by a firm

Option D: The difference the price a consumer pays for an item and the price he/she is willing to pay

Correct Answer: The difference the price a consumer pays for an item and the price he/she is willing to pay ✔

Option A: A change in technology

Option B: A change in the number of producers

Option C: A shift in demand

Option D: A change in costs

Correct Answer: A shift in demand ✔

Option A: A change in income

Option B: A change in the number of buyers

Option C: A change in advertising

Option D: A shift in supply

Correct Answer: A shift in supply ✔

Option A: An fall in demand

Option B: An increase in supply

Option C: improvements in production technology

Option D: An increase in demand

Correct Answer: An increase in demand ✔

Option A: Lead to a movement along the supply curve

Option B: Shift the demand curve

Option C: Shift the supply curve

Option D: Lead to an extension of supply

Correct Answer: Shift the supply curve ✔

Option A: A higher equilibrium price and output

Option B: A lower equilibrium price and higher output

Option C: A lower equilibrium price and output

Option D: A higher equilibrium price and lower output

Correct Answer: A higher equilibrium price and output ✔

Option A: The impact on both price and quantity is ambiguous

Option B: Price will decrease, quantity is ambiguous.

Option C: price will increase, quantity will decrease

Option D: price will increase, quantity is ambiguous.

Correct Answer: price will increase, quantity is ambiguous. ✔

Option A: price will decrease, quantity is ambiguous

Option B: The impact on both price and quantity is ambiguous.

Option C: Price will increase, quantity will increase

Option D: price will increase, quantity will decrease

Correct Answer: price will increase, quantity is ambiguous. ✔

Option A: the change in the equilibrium quantity to be ambiguous and the equilibrium price to fall.

Option B: the equilibrium quantity to rise and the equilibrium price to rise

Option C: the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous

Option D: the equilibrium quantity to rise and the equilibrium price to fall

Correct Answer: the equilibrium quantity to rise and the equilibrium price to fall ✔

Option A: an increase in the equilibrium price and quantity

Option B: a decrease in the equilibrium price and an increase in the equilibrium quantity

Option C: none of these answers

Option D: a decrease in the equilibrium price and quantity.

Correct Answer: an increase in the equilibrium price and quantity ✔

Option A: there is a shortage and the price will fall

Option B: the quantity demanded is equal to the quantity supplied supplied and the price remains unchanged

Option C: there is surplus and the price will rise

Option D: there is a shortage and the price will rise

Correct Answer: the quantity demanded is equal to the quantity supplied supplied and the price remains unchanged ✔

Option A: there is a surplus and the price will rise

Option B: there is a shortage and the price will fall

Option C: there is a shortage and the price will rise

Option D: The quantity demanded is equal to the quantity supplied and the price remains unchanged

Correct Answer: there is a surplus and the price will fall ✔

Option A: an increase in the price of watches

Option B: none of these answers

Option C: a decrease in the price of watch batteries if watch batteries and watches are complements

Option D: a decrease in consumer incomes if watches are a normal good

Correct Answer: none of these answers ✔

Option A: a normal good

Option B: none of these answers

Option C: an inferior good

Option D: a substitute good

Correct Answer: an inferior good ✔

Option A: None of these answers

Option B: decreases the quantity supplied of that good

Option C: decreases the quantity demanded for that good

Option D: increases the quantity supplied of that good

Correct Answer: decreases the quantity supplied of that good ✔

Option A: firms that set their own prices

Option B: only one seller.

Option C: at least a few sellers.

Option D: many buyers and sellers.

Correct Answer: many buyers and sellers. ✔