Economics MCQs

Option A: a change in the real money supply

Option B: a change in real income

Option C: a change in competition in the banking industry

Option D: any of the above

Correct Answer: any of the above ✔

Option A: bank deposits, building society deposits

Option B: Currency in circulation, banks cash reserves

Option C: retail sight deposits building society deposits

Option D: retail deposits, wholesale deposits

Correct Answer: Currency in circulation, banks cash reserves ✔

Option A: fall

Option B: not change

Option C: increase

Option D: None of these

Correct Answer: increase ✔

Option A: bank opening hours, the proportion of weekly paid employee’s interest rates

Option B: the price level interest rates real income

Option C: The time of year bank opening hours the price level

Option D: The proportion of weekly paid employees the time of year real income

Correct Answer: the price level interest rates real income ✔

Option A: State Bank of Pakistan Issue Department

Option B: Money + bank cards + credit cards

Option C: Cheques + money + bank cards + credit cards

Option D: Currency in circulation plus bank deposits

Correct Answer: Currency in circulation plus bank deposits ✔

Option A: Control the money supply

Option B: Provide notes and coins for trade

Option C: Make a profit

Option D: Provide a cheque clearing system

Correct Answer: Make a profit ✔

Option A: flat; steep

Option B: flat; flat

Option C: steep; flat

Option D: steep; steep

Correct Answer: flat; steep ✔

Option A: the economy moves up the LM curve

Option B: The LM curves shifts to the left

Option C: The economy moves down the LM curve

Option D: The LM curve shift to the right

Correct Answer: The LM curve shift to the right ✔

Option A: aggregate supply curve

Option B: LM curve

Option C: aggregate demand curve

Option D: IS curve

Correct Answer: LM curve ✔

Option A: be reduced

Option B: not be affected

Option C: fall to zero

Option D: be increased

Correct Answer: be increased ✔

Option A: Suffer even more

Option B: not be reduced as much as it would have been

Option C: be replaced by foreign investment

Option D: be replaced by consumer spending

Correct Answer: not be reduced as much as it would have been ✔

Option A: downward sloping over all levels of output

Option B: upward sloping over all levels of output

Option C: horizontal until it reaches full capacity and then becomes vertical

Option D: vertical until it reaches full capacity and then becomes horizontal

Correct Answer: horizontal until it reaches full capacity and then becomes vertical ✔

Option A: decrease the money supply

Option B: increase the money supply

Option C: increase the demand for money

Option D: decrease the demand for money

Correct Answer: increase the money supply ✔

Option A: is determined in the goods market and influences the level of planned investment and thus the money market

Option B: is determined in the money market and influences the level of planned investment and thus the goods market

Option C: is determined in the goods market and has no influences on the money market

Option D: is determined in the money market and has no influence on the goods market

Correct Answer: is determined in the money market and influences the level of planned investment and thus the goods market ✔

Option A: contractionary fiscal policy

Option B: expansionary monetary policy

Option C: contractionary monetary policy

Option D: expansionary fiscal policy

Correct Answer: expansionary monetary policy ✔

Option A: aggregate output increases the demand for money increase the interest rate increase planned investment

Option B: money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase

Option C: money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases

Option D: money demand increases the interest rate decreases planned investment increases aggregate output increases and money demand increases

Correct Answer: money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase ✔

Option A: the rate at which current consumption can be exchanged for future consumption

Option B: the price of borrowing money

Option C: The opportunity cost of holding money

Option D: the return on money that is saved for the future

Correct Answer: The opportunity cost of holding money ✔

Option A: the discount rates

Option B: the level of aggregate output

Option C: the interest rates

Option D: the inflation rates

Correct Answer: the interest rates ✔

Option A: Profit motive

Option B: Precautionary motive

Option C: Transactions motive

Option D: speculation motive

Correct Answer: Transactions motive ✔

Option A: An increase in the interest rate

Option B: An increase in the level of aggregate output

Option C: A decrease in the price level

Option D: An increase in the supply of money

Correct Answer: An increase in the level of aggregate output ✔

Option A: change in a certain direction

Option B: remain constant

Option C: fall

Option D: rise

Correct Answer: rise ✔

Option A: reduce

Option B: have no effect on

Option C: increase

Option D: double

Correct Answer: reduce ✔

Option A: required reserve ratio

Option B: profit margin

Option C: excess reserves

Option D: net worth

Correct Answer: excess reserves ✔

Option A: an asset

Option B: capital

Option C: net worth

Option D: a liability

Correct Answer: a liability ✔

Option A: barter money

Option B: currency value

Option C: legal tender

Option D: commodity money

Correct Answer: legal tender ✔

Option A: The difference between the price at which commercial bank sells an asset to the central bank and the price it agrees to buy it back can be expressed as an annualized percentage of the selling price and this is called the refinancing rate

Option B: Commercial banks may borrow from and lend to each other and the interest rate at which they do this is called the refinancing rate

Option C: In the UK the refinancing rate is known as the repo rate and in the USA it is referred to as the discount rate.

Option D: If the central bank has bought some assets from a commercial bank with an agreement that the commercial bank will buy them back at a later date, then this would be called a repo

Correct Answer: Commercial banks may borrow from and lend to each other and the interest rate at which they do this is called the refinancing rate ✔

Option A: rise by an amount that depends on the bank’s reserve ratio

Option B: rise by less than the amount of the deposit

Option C: fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio

Option D: fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio

Correct Answer: A. rise by an amount that depends on the bank’s reserve ratio ✔

Option A: the money supply increases by more than Rs 1,000

Option B: the money supply increase by less than Rs 1,000

Option C: the money supply decrease by less than Rs 1,000

Option D: the money supply decrease by more than Rs 1,000

Correct Answer: The money supply is unaffected ✔

Option A: The interest rate at Which commercial banks lend to and borrow from each other

Option B: The interest rate the European Central Bank pays on reserves

Option C: The interest rates the public pays when borrowing from banks

Option D: The interest rates the European Central Bank charges on loans to banks

Correct Answer: The interest rates the European Central Bank charges on loans to banks ✔

Option A: assets

Option B: deposits

Option C: loans

Option D: government bonds

Correct Answer: deposits ✔

Option A: 4

Option B: 20

Option C: 25

Option D: 5

Correct Answer: 5 ✔

Option A: A debit card is not really money because it is only a means of transferring money between accounts

Option B: All the wealth that people hold, in whatever form, should be considered as money

Option C: Wealth held in the current account you hold with your bank is almost as convenient for buying things as wealth held in your wallet so the wealth in current accounts should be included in measures of money

Option D: In a complex economy it is not easy to draw a clear dividing line between assets that should be considered as money and those that should not

Correct Answer: All the wealth that people hold, in whatever form, should be considered as money ✔

Option A: Paper euros

Option B: gold

Option C: Silver coins

Option D: cigarettes

Correct Answer: Paper euros ✔

Option A: The value of all coins and currency in circulation at any time

Option B: Anything that is generally accepted as a medium of exchange

Option C: The same as income

Option D: All of the above

Correct Answer: Anything that is generally accepted as a medium of exchange ✔

Option A: charging different prices on the basis of race

Option B: charging different prices for goods with different costs of production

Option C: charging different prices based on cost-of-service differences

Option D: selling a certain product of given quality and cost per unit at different prices to different buyers

Correct Answer: selling a certain product of given quality and cost per unit at different prices to different buyers ✔

Option A: charge a higher price

Option B: produce a lower quantity of the product

Option C: make a greater amount of economic profit

Option D: all of the above

Correct Answer: all of the above ✔

Option A: the price is greater than the marginal revenue

Option B: the price is less than the marginal revenue

Option C: there is no relation

Option D: they are equal

Correct Answer: the price is greater than the marginal revenue ✔

Option A: increase should

Option B: decrease output

Option C: keep output the same because profits are maximized when marginal revenue exceeds marginal cost

Option D: raise the price

Correct Answer: increase should ✔

Option A: will rise

Option B: will fall

Option C: will remain the same

Option D: could either rise or fall depending on the elasticity of the monopolist’s supply curve

Correct Answer: will rise ✔

Option A: tends to be inefficient.

Option B: usually lowers the cost of production dramatically.

Option C: creates synergies between the newly acquired firm and other government-owned companies.

Option D: does none of the things described in these answers

Correct Answer: tends to be inefficient. ✔

Option A: Cause the monopolist to exit the market

Option B: improve efficieny

Option C: raise the price of good

Option D: attract additional firms to enter the market

Correct Answer: Cause the monopolist to exit the market ✔

Option A: higher prices and lower output

Option B: higher prices and higher output

Option C: lower prices and lower output

Option D: lower prices and higher output

Correct Answer: higher prices and lower output ✔

Option A: marginal revenue equals marginal cost

Option B: marginal revenue equals price

Option C: marginal cost equals price

Option D: marginal cost equals demand

Correct Answer: marginal revenue equals marginal cost ✔

Option A: natural monopoly

Option B: perfect competitor

Option C: government monopoly

Option D: regulated monopoly

Correct Answer: natural monopoly ✔

Option A: Bans monopolies

Option B: Fines all monopolies

Option C: Prevents firms acquiring more than 25% of the market

Option D: Has the right to investigate monopolies and will assess each one on its own merits

Correct Answer: Has the right to investigate monopolies and will assess each one on its own merits ✔

Option A: Monopolies are inefficient

Option B: Monopoly profits ac as an incentive for innovation

Option C: Monopolies are alocatively efficient

Option D: Monopolies are productively efficient

Correct Answer: Monopoly profits ac as an incentive for innovation ✔

Option A: Products are differentiated

Option B: There is freedom of entry and exit into the industry in the long run

Option C: The firm is a price taker

Option D: There is one main sellers

Correct Answer: There is freedom of entry and exit into the industry in the long run ✔

Option A: The firm is Productively efficient

Option B: The firm is allocatively inefficient

Option C: The firm produces where marginal cost is less than marginal revenue

Option D: The firm produces at the socially optimal level

Correct Answer: The firm is allocatively inefficient ✔

Option A: Equals the demand curve

Option B: Is parallel with the demand curve

Option C: Lies below and converges with the demand curve

Option D: Lies below and diverges from the demand curve

Correct Answer: Lies below and diverges from the demand curve ✔

Option A: The section with the richest people

Option B: The section with the oldest people

Option C: The section with the most inelastic demand

Option D: The section with the most elastic demand

Correct Answer: The section with the most inelastic demand ✔

Option A: some degree of monopoly power

Option B: an ability to separate the market

Option C: an ability to prevent reselling

Option D: all of the above

Correct Answer: all of the above ✔

Option A: economies of scale

Option B: a high proportion of the total cost in the cost of capital goods

Option C: the market is very small

Option D: all of the above

Correct Answer: all of the above ✔

Option A: 1

Option B: 2

Option C: 3

Option D: 4

Correct Answer: 3 ✔

Option A: marginal revenue equals average total cost

Option B: Price equals marginal revenue

Option C: marginal revenue equals marginal cost

Option D: total revenue equals total cost

Correct Answer: marginal revenue equals marginal cost ✔

Option A: One seller of the product

Option B: low barriers to entry

Option C: close substitute products

Option D: perfect information

Correct Answer: One seller of the product ✔

Option A: there is some barrier to entry to that market

Option B: Potential competitors sometimes don’t notice the the profits.

Option C: the monopolist is financially powerful.

Option D: antitrust laws eliminate competitors for a specified number of years.

Correct Answer: there is some barrier to entry to that market ✔

Option A: Perfect price discrimination generates a deadweight loss

Option B: Price discrimination can raise economic welfare.

Option C: price discrimination requires that seller be able to separate buyers according to their willingness to pay.

Option D: Price discrimination increases a monopolist’s profits.

Correct Answer: Perfect price discrimination generates a deadweight loss ✔

Option A: Increase competition in an industry by preventing mergers and breaking up large firms.

Option B: regulate the prices charged by a monopoly

Option C: increase merger activity to help generate synergies that reduce costs and raise efficiency.

Option D: create public ownership of natural monopolies

Correct Answer: Increase competition in an industry by preventing mergers and breaking up large firms. ✔

Option A: does not exist

Option B: is the marginal cost curve above average variable cost?

Option C: is the marginal cost curve above average total cost

Option D: is the upward-sloping portion of the average total cost curve

Correct Answer: does not exist ✔

Option A: underproduction of the good

Option B: the monopoly’s profits

Option C: the monopoly’s losses

Option D: overproduction of the good

Correct Answer: underproduction of the good ✔

Option A: Thomson has a legally protected exclusive right to produce this textbook

Option B: Thomson owns a key resource in the production of textbooks.

Option C: Thomson is a natural monopoly,

Option D: Thomson is a very large company

Correct Answer: Thomson has a legally protected exclusive right to produce this textbook ✔

Option A: In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost.

Option B: In competitive markets price equals marginal cost, in monopolized markets price equals marginal cost

Option C: In competitive markets price exceeds marginal cost, in monopolized markets price exceeds marginal cost

Option D: In competitive markets price exceeds marginal cost in monopolized markets price equals marginal cost

Correct Answer: In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost. ✔

Option A: below the price because the price effect outweighs the output effect

Option B: above the price because the output effect outweighs the price effect

Option C: above the price because the price effect outweighs the output effect

Option D: below the price because the output effect outweighs the price effect

Correct Answer: below the price because the price effect outweighs the output effect ✔

Option A: A single firm is very large

Option B: The government gives a single firm the exclusive right to produce some good

Option C: The costs of production make a single producer more efficient than a large number of productions

Option D: A key resource is owned by a single firm

Correct Answer: A single firm is very large ✔

Option A: The price is greater than the marginal cost

Option B: The price is greater than the marginal benefit

Option C: The price is greater than the average revenue

Option D: The price is greater than the marginal revenue

Correct Answer: The price is greater than the marginal cost ✔

Option A: There are many buyers and sellers

Option B: There is one main buyer

Option C: There is one main seller

Option D: The actions of one firm do not affect the market price and quantity

Correct Answer: There is one main seller ✔

Option A: Patents

Option B: Internal economies of scale

Option C: Mobility of resources

Option D: High investment costs

Correct Answer: Mobility of resources ✔

Option A: The price set is greater than the marginal cost

Option B: The price is less than the average cost

Option C: The average revenue equals the marginal cost

Option D: Revenue equals total cost

Correct Answer: The price set is greater than the marginal cost ✔

Option A: The price is greater than the marginal cost

Option B: The price is greater than the average cost

Option C: Costs are higher than they could be due to a lack of competitive pressure

Option D: There are external cost

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.
All of these answers are criticisms of advertising and brand names

Correct Answer: Advertising increase competition Which causes unnecessary bankruptcies and layoffs. ✔

Option A: the producer of a highly differentiated consumer product

Option B: the manufacturer of an undifferentiated consumer commodity

Option C: a perfect competitor

Option D: The manufacturer of an industrial product

Correct Answer: the producer of a highly differentiated consumer product ✔

Option 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

Option B: Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms.

Option C: Monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.

Option D: The products are differentiated in a monopolistically competitive market just like in a competitive market.

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 ✔

Option A: Since price is above marginal cost surplus is redistributed from buyers to sellers

Option B: monopolistically competitive firms earn economic profits in the long run

Option C: monopolistically competitive firms produce beyond their efficient scale

Option D: excess of the cost of production and this causes a deadweight loss.

Correct Answer: excess of the cost of production and this causes a deadweight loss. ✔

Option A: a manual fracture of breakfast cereal

Option B: a wholesaler of crude oil

Option C: a restaurant

Option D: a manufacturer of home heating and air conditioning

Correct Answer: a wholesaler of crude oil ✔

Option A: losses and firms exit the market

Option B: profits and firms exit the market

Option C: losses and firms enter the market

Option D: profits and firms enter the market

Correct Answer: profits and firms enter the market ✔

Option A: breakfast

Option B: cotton

Option C: video games

Option D: beer

Correct Answer: cotton ✔

Option A: Advertising increases competition

Option B: Advertising provides information to customers about prices, new products and location of retail outlets.

Option C: Advertising provides a creative outlet for artists and writers

Option D: Advertising provides new firms with the means to attract customers from existing firms.

Correct Answer: Advertising provides a creative outlet for artists and writers ✔

A. all of these answers
B. are useful even in socialist economics such as the former Soviet Union
C. provide information about the quality of the product
give firms incentive to maintain high quality

Correct Answer: all of these answers ✔

Option A: monopolistically competitive firms charge prices equal to their marginal costs just like monopolists

Option B: a monopolistically competitive firms faces a downward-sloping demand curve for its differentiated product and so does a monopolist

Option C: monopolistically competitive markets have free entry and exit just like a monopolistic market

Option D: monopolistically competitive firms produce beyond their efficient scale and so do monopolists

Correct Answer: a monopolistically competitive firms faces a downward-sloping demand curve for its differentiated product and so does a monopolist ✔

Option A: there are too many firms in the market and market efficiency could be increased if firms exited the market

Option B: the number of firms in the market is optimal and the market is efficient

Option C: There are too few firms in the market and market efficiency could be be increased with additional entry

Option D: The only way to improve efficiency in this market is for the government to regulate it like a natural monopoly.

Correct Answer: there are too many firms in the market and market efficiency could be increased if firms exited the market ✔

Option A: at the efficient scale and charge a price equal to marginal cost

Option B: at the efficient scale and charge a price above marginal cost

Option C: With excess capacity and charge a price above marginal cost

Option D: With excess capacity and charge a price equal to marginal cost

Correct Answer: With excess capacity and charge a price above marginal cost ✔

Option A: marginal revenue and then use the demand curve to determine the price consistent with this quantity

Option B: average total cost and then use the supply curve to determine the price consistent with this quantity

Option C: marginal revenue and then use the supply curve to determine the price consistent with this quantity

Option D: average total cost and then use the demand curve to determine the price consistent with this quantity

Correct Answer: marginal revenue and then use the demand curve to determine the price consistent with this quantity ✔

Option A: the monopolist faces a downward-sloping demand curve while the monopolistic competitor faces an elastic demand curve

Option B: the monopolist charges a price above marginal cost while the monopolistic competitor charges a price equal to marginal cost

Option C: The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run

Option D: Both the monopolist and the monopolistic competitor operate at the efficient scale

Correct Answer: The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run ✔

Option A: free entry and exit

Option B: long run economic profits

Option C: many sellers

Option D: differentiated products

Correct Answer: long run economic profits ✔

Option A: Lawyer services purchased by a home buyer

Option B: The purchase of a new Nissan produced in Sunderland

Option C: Copper purchased by tap manufacturer Bristan

Option D: A new art gallery purchased by the city of Newcastle

Correct Answer: Copper purchased by tap manufacturer Bristan ✔

Option A: foreign; domestic

Option B: current year; base year

Option C: domestic; foreign

Option D: base year; current year

Correct Answer: base year; current year ✔

Option A: Rs50

Option B: Rs100

Option C: Rs650

Option D: Rs500

Correct Answer: Rs50 ✔

Option A: intermediate goods

Option B: final goods and services

Option C: manufactured goods

Option D: inferior goods and services

Correct Answer: final goods and services ✔

Option A: final goods and services intermediate goods, transfer payments, and rent

Option B: consumption investment government purchases and net exports

Option C: consumption transfer payments. wages and profits.

Option D: Net National Product Gross National Product, and Disposable personal income

Correct Answer: Net National Product Gross National Product, and Disposable personal income ✔

Option A: intermediate production

Option B: Net National Product

Option C: Investment

Option D: depreciation

Correct Answer: depreciation ✔

Option A: It measures wealth not income

Option B: It measures Gross Domestic Product

Option C: It does not measure the quality of the items produced

Option D: It is only measured every five years:

Correct Answer: It measures wealth not income ✔

Option A: Deduct depreciation

Option B: Deduct indirect taxes

Option C: Deduct subsidies

Option D: Add inflation

Correct Answer: Deduct subsidies ✔

Option A: Surpluses are likely to occur:

Option B: Prices are likely to fall

Option C: Supply will increase immediately to match demand

Option D: Shortages may occur

Correct Answer: Supply will increase immediately to match demand ✔

Option A: Real GDP per capita

Option B: Real GDP

Option C: Real GDP population

Option D: Real GDP plus depreciation

Correct Answer: Real GDP per capita ✔

Option A: Gross National Product adjusted for inflation

Option B: Gross Domestic Product adjusted for inflation

Option C: Gross Domestic Product plus net property income from abroad

Option D: Gross National Product minus depreciation

Correct Answer: Gross National Product minus depreciation ✔

Option A: investment

Option B: net exports

Option C: government purchases

Option D: consumption

Correct Answer: investment ✔

Option A: Consumption in increase by Rs40,000 and net export decreases by Rs40,000

Option B: Net exports increase by Rs40,000

Option C: There is no impact because this transaction does not involve domestic production

Option D: Investment increased by Rs40,000 and net exports increases by Rs40,000

Correct Answer: Consumption in increase by Rs40,000 and net export decreases by Rs40,000 ✔

Option A: intermediate production exceeds final production

Option B: foreigners are producing more in the Pakistan then Pakistanis are producing in foreign countries

Option C: real GNP exceeds nominal GNP

Option D: real GDP exceeds nominal GDP

Correct Answer: foreigners are producing more in the Pakistan then Pakistanis are producing in foreign countries ✔

Option A: the value of taking a day off from work

Option B: consulting services

Option C: intermediate sales

Option D: illegal drug sales

Correct Answer: consulting services ✔

Option A: must have fallen

Option B: must have risen

Option C: must have stayed the same

Option D: may have risen fallen, or stayed the same because there is not enough information to determine what happened to real output

Correct Answer: may have risen fallen, or stayed the same because there is not enough information to determine what happened to real output ✔