Basic Economics MCQ PDF

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22 Chapters
4636 Verified Questions
Basic Economics
MCQ PDF
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Basic Economics introduces students to the foundational concepts and principles

governing economic systems. The course covers key topics such as supply and demand,

market structures, pricing mechanisms, production and distribution of goods and

services, and the roles of consumers and producers in the economy. Students will also

explore the impact of government policies, international trade, and globalization on

economic development. Through real-world examples and case studies, the course

aims to develop analytical skills and an understanding of how economic forces

influence everyday life and decision-making.

Recommended Textbook
Principles of Microeconomics 7th Canadian Edition by McKenzie Mankiw

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22 Chapters
4636 Verified Questions
4636 Flashcards
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Page 2
Chapter 1: Ten Principles of Economics
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218 Verified Questions
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Sample Questions
Q1) What is the term for what you give up to obtain an item
A)opportunity cost
B)explicit cost
C)true cost
D)direct cost
Answer: A

Q2) According to economists,what do people respond to

A)laws
B)incentives
C)threats more than rewards
D)positives, but not negatives
Answer: B

Q3) What will pollution regulations do

A)increase profit to firms
B)impose a tradeoff on society
C)allow firms to raise workers' wages
D)lower prices for consumers
Answer: B

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Page 3
Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) What is another name for goods and services produced by firms
A)factors of production
B)outputs
C)inputs
D)resources
Answer: B

Q2) How can the production possibilities frontiers shift outward

A)if government increases the amount of money in the economy
B)if there is an increase in technology
C)if resources can be moved from the production of one good to another
D)if opportunity costs are reduced
Answer: B

Q3) Refer to Table [Link] is the opportunity cost to Toyland of increasing the
production of fire trucks from 450 to 500
A)50 dolls
B)100 dolls
C)150 dolls
D)200 dolls
Answer: B

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Page 4
Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) Suppose a gardener produces both green beans and corn in her [Link] the
opportunity cost of one bushel of corn is 2/3 bushel of green beans,what is the
opportunity cost of 1 bushel of green beans
A)2/5 bushel of corn
B)8/5 bushels of corn
C)3/2 bushels of corn
D)5/3 bushels of corn
Answer: C

Q2) Refer to Table [Link] does each producer have an absolute or comparative
advantage in
A)The rancher has an absolute advantage in both goods, and the farmer has a
comparative advantage in meat.
B)The rancher has an absolute advantage in meat, and the farmer has a comparative
advantage in potatoes.
C)The rancher has an absolute advantage in meat, and the farmer has a comparative
advantage in neither good.
D)The rancher has an absolute advantage in neither good, and the farmer has a
comparative advantage in potatoes.
Answer: B

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Page 5
Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) Refer to the Figure [Link] could cause the shift from D to D
A)an increase in price
B)a decrease in the price of a complement
C)an increase in technology
D)a decrease in the price of a substitute

Q2) Refer to the Figure [Link] would happen at the equilibrium price
A)At the equilibrium price, 200 units would be supplied and demanded.
B)At the equilibrium price, 400 units would be supplied and demanded.
C)At the equilibrium price, 600 units would be supplied and demanded.
D)At the equilibrium price, 600 units would be supplied, but only 200 would be
demanded.

Q3) Market demand is given as Q_D= 300- [Link] supply is given as
Q_S= 2P + [Link] price increases from $50 to $60,what is the price elasticity of
demand
A)0.6
B)0.8
C)1.2
D)2.1

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Page 6
Chapter 5: Elasticity and Its Application
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230 Flashcards
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Sample Questions
Q1) Refer to Figure [Link] price falls from PA to PB,which demand curve is most elastic
A)D
B)D
C)D
D)D

Q2) Suppose there is a 3 percent increase in the price of good X and a resulting 6
percent decrease in the quantity of X [Link] is the price elasticity of demand
for X
A)0
B)2
C)6
D)infinite

Q3) What would be the absolute value of the elasticity if demand is elastic
A)less than 1
B)equal to 1
C)equal to 0
D)greater than 1

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Page 7
Chapter 6: Supply, demand, and Government Policies
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Sample Questions
Q1) Binding price ceilings benefit consumers because they allow consumers to buy all
the goods they demand at a lower price.
A)True
B)False

Q2) What will result from a binding price ceiling in the computer market
A)a surplus of computers
B)a shortage of computers
C)the quantity demanded of computers being equal to the quantity supplied
D)an increase in the demand for computers

Q3) Upon whom does a minimum wage have its greatest impact
A)older workers
B)male workers
C)female workers
D)teenage workers

Q4) Which of the following is a result of price controls

A)an equitable outcome
B)an efficient outcome
C)additional inequities
D)revenue for the government

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Page 8
Chapter 7: Consumers, producers, and the Efficiency of

Markets
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Sample Questions
Q1) Suppose the demand for nachos [Link] will happen to producer surplus in
the market for nachos
A)It increases.
B)It decreases.
C)It is unaffected by this change in market forces.
D)It decreases briefly then increases.

Q2) Producer surplus is the amount a seller is paid minus the cost of production.
A)True
B)False

Q3) Amy buys a new horse for $[Link] receives consumer surplus of $100 on her
[Link] is her willingness to pay
A)$100
B)$1400
C)$1500
D)$1600

Q4) Refer to Table [Link] the equilibrium price,what would producer surplus be
A)$18
B)$24
C)$36
Page 9
D)$48

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Chapter 8: Application: the Costs of Taxation
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Sample Questions
Q1) Refer to Figure [Link] would happen to consumer surplus if the tax were imposed
on the buyer
A)It would fall by $900.
B)It would fall by $1800.
C)It would fall by $2700.
D)It would fall by $3600.

Q2) What is total surplus without a tax equal to

A)consumer surplus plus producer surplus
B)consumer surplus minus producer surplus
C)consumer surplus minus tax revenue, plus producer surplus
D)consumer surplus plus producer surplus, plus tax revenue

Q3) Suppose that the equilibrium quantity in the market for widgets has been 200 per
[Link] a tax of $5 per widget is [Link] price paid by buyers increases by $2
and the after-tax price received by sellers falls by $[Link] government is able to raise
$750 per month in revenue from the [Link] is the deadweight loss from the tax
A)$50
B)$75
C)$125
D)$250

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Page 10
Chapter 9: Application: International Trade
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Sample Questions
Q1) When will the domestic price of a product equal the world price
A)when the domestic supply of the product increases
B)when the country allows free trade
C)when trade restrictions are imposed on the product
D)when the country has a comparative advantage in producing the product

Q2) Suppose that Australia imposes a tariff on imported [Link] the increase in producer
surplus is $100 million,the increase in tariff revenue is $200 million,and the reduction in
consumer surplus is $500 million,the deadweight loss of the tariff is $300 million.
A)True
B)False

Q3) If Brazil has a comparative advantage in producing sugar,and trade in sugar is

allowed,what can be said about Brazil
A)Brazil will become an importer of sugar.
B)Brazil will become an exporter of sugar.
C)Brazil could only become an importer of sugar if it has absolute advantage in
producing sugar.
D)Brazil could only become an exporter of sugar if it has absolute advantage in
producing sugar.

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Page 11
Chapter 10: Externalities
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Sample Questions
Q1) When correcting for an externality,command-and-control policies are always
preferable to market-based policies.
A)True
B)False

Q2) What is emission controls on automobiles an example of

A)a collective tax on automobiles, based on how much they pollute
B)a command-and-control policy to increase social efficiency
C)a policy that reduces pollution by allocating resources through market mechanisms
D)a policy to reduce congestion on urban highways

Q3) A technology spillover is a type of negative externality.

A)True
B)False

Q4) What will a positive externality cause a market to produce

A)more than is socially desirable
B)more than is market optimal
C)less than is socially desirable
D)less than is market optimal

Q5) What is meant by “internalizing” an externality? How can a negative externality be

internalized?

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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) The free-rider problem arises when the number of beneficiaries is large and
exclusion of any of them is impossible.
A)True
B)False

Q2) The government developed the patent system so that private inventors could make
a reasonable profit from their own inventions.
A)True
B)False

Q3) Which of these common resources is one of the least regulated today
A)national parks
B)the ocean
C)government land in the North
D)the Great Lakes

Q4) What is one potential solution to overused,deteriorating national parks

A)to have Parliament increase the entrance fees
B)to decrease the area accessible to park users
C)to decrease management and maintenance of facilities
D)to reduce the number of improved camping facilities

Q5) Can we use cost and benefit analysis to evaluate human life and how

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Chapter 12: The Design of the Tax System
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Sample Questions
Q1) Which statement correctly characterizes high marginal tax rates
A)They distort incentives to work.
B)They are used to encourage saving behaviour.
C)They will invariably lead to lower average tax rates.
D)They are not associated with deadweight losses.

Q2) What is one of the most difficult issues associated with trying to structure a tax
policy to satisfy horizontal equity
A)determining whether or not a taxpayer falls within the highest income quintile
B)determining the level of transfer payments made to low-income groups
C)determining the source of income for taxpayers
D)determining what differences are relevant to a family's ability to pay

Q3) An efficient tax system is one that imposes small deadweight losses and small
administrative burdens.
A)True
B)False

Q4) What is an advantage of a consumption tax over the present tax system
A)A consumption tax is much harder for taxpayers to cheat.
B)A consumption tax would save the government millions in administrative costs.
C)A consumption tax places more of the tax burden on the wealthy.
D)A consumption tax does not discourage saving.

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Chapter 13: The Costs of Production
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209 Flashcards
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Sample Questions
Q1) Which of the following must necessarily occur as the quantity of output increases
A)marginal cost must rise
B)average total cost must rise
C)average variable cost must rise
D)average fixed cost must fall

Q2) How is average total cost (ATC) calculated

A)ATC = (change in total cost) ÷ (change in quantity of output)
B)ATC = (change in total cost) ÷ (change in quantity of input)
C)ATC = total cost ÷ quantity of output
D)ATC = total fixed cost + total variable cost

Q3) What does marginal cost equal

A)total cost divided by quantity of output produced
B)total output divided by the change in total cost
C)the change of total cost divided by the change of output
D)average cost divided by output

Q4) Several related measures of cost can be derived from a firm's total cost.
A)True
B)False

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Page 15
Chapter 14: Firms in Competitive Markets
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Sample Questions
Q1) For all positive levels of output,when will a firm shut down in the short run
A)when its loss exceeds its average costs
B)when its total revenue is less than its average variable costs
C)when the price of its product is less than its average variable cost
D)when it cannot cover its sunk costs

Q2) When a firm has little ability to influence market prices,it is said to be in what kind of
a market
A)competitive
B)strategic
C)thin
D)powerless

Q3) Refer to Figure [Link] at a market price of $2.50,62,500 units of output are supplied to
this [Link] many identical firms are participating in this market
A)75
B)100
C)250
D)300

Q4) Why in the perfectly competitive market is the long-run supply curve more elastic
than the short-run supply curve

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Page 16
Chapter 15: Monopoly
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Sample Questions
Q1) What is the defining characteristic of a natural monopoly? Give an example of a
natural monopoly.

Q2) How is a monopolist's profit-maximizing quantity of output determined

A)by the intersection of the marginal-revenue curve and the marginal-cost curve
B)by the intersection of the marginal-revenue curve and the average-total-cost curve
C)by the intersection of the average revenue curve and the marginal-cost curve
D)by the intersection of the demand curve and the average-total-cost curve

Q3) When the government creates a monopoly,what may the social loss include
A)falling marginal cost
B)the cost of maintaining its monopoly position
C)high monopoly profits
D)lost producer surplus

Q4) What can be said about the laws governing patents and copyrights
A)They can lead to monopolies.
B)They are intended to serve private interests not the public interest.
C)They have costs but no benefits.
D)They can discourage research.

Q5) Graphically depict the deadweight loss caused by a monopoly. How is this similar to
the deadweight loss from taxation?

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Chapter 16: Monopolistic Competition
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Sample Questions
Q1) If a firm in a monopolistically competitive market successfully uses advertising to
decrease elasticity of demand for its product,what will result
A)The firm will be able to increase its markup over marginal cost.
B)The firm will eventually have to lower price to remain competitive.
C)The decreased elasticity of demand will increase the well-being of society.
D)The decreased elasticity of demand will reduce average total cost.

Q2) When a profit-maximizing firm in a monopolistically competitive market is

producing the long-run equilibrium quantity,what is the result
A)Its average revenue will equal its marginal cost.
B)Its marginal revenue will be tangent to its marginal cost.
C)It will be earning positive economic profits.
D)Its demand curve will be tangent to its average-total-cost curve.

Q3) Refer to Table [Link] firm has total fixed costs of $20 and a constant marginal cost
of $5 per [Link] will the firm do
A)It will produce 2 units; firms will exit the market in the long run.
B)It will produce 4 units; firms will exit the market in the long run.
C)It will produce 6 units; firms will exit the market in the long run.
D)It will produce 8 units; firms will exit the market in the long run.

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Page 18
Chapter 17: Oligopoly
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Sample Questions
Q1) Larger cartels have a greater probability of reaching the monopoly outcome than do
smaller cartels.
A)True
B)False

Q2) Refer to Table [Link] that trade negotiations are repeated each [Link] a
repeated game scenario,what would be the main difference of the game
A)Mexican negotiators will assume that Canadian negotiators will never retaliate for a
noncooperative trade policy.
B)Both parties will assume that the other will choose a strategy that optimizes the total
value of the trade relationship.
C)The Nash equilibrium will provide the largest possible gains to each party.
D)Each will follow a dominant strategy based entirely on self-interest.

Q3) During the 1990s,members of OPEC operated independently from one [Link]
did this cause the world market for crude oil to become close to
A)a monopoly market
B)an oligopoly market
C)a duopoly market
D)a competitive market

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Page 19
Chapter 18: The Markets for the Factors of Production
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Sample Questions
Q1) Refer to Figure [Link] that W
= $20 and W
= $22 and that the market stays in [Link] would happen to the marginal
product of labour if the labour demand curve shifts from D to D
A)The shift decreases the value of the marginal product of labour by more than $2.
B)The shift decreases the value of the marginal product of labour by $2.
C)The shift increases the value of the marginal product of labour by less than $2.
D)The shift increases the value of the marginal product of labour by $2.

Q2) Refer to Figure [Link] the relevant labour demand curve is D and the labour
market is in equilibrium,how can we interpret W
A)The value of the marginal product of labour to firms is less than W .
B)The opportunity cost of leisure to workers is greater than W .
C)The wage is W .
D)The price of output is higher at W than at W
)

Q3) Using the theory of wage determination,explain why wages in developing countries
are typically quite low.

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Page 20
Chapter 19: Earnings and Discrimination
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Sample Questions
Q1) A recent study of the determinants of wages for clerical staff at a university found
that years of schooling,years of experience,age,and job characteristics only explained
about one-half of the difference in [Link] other factors that may be important
in explaining wage differences for clerical [Link] your answer,explain how you would
measure these factors for use in empirical analysis.

Q2) What can we say about the transferability of the ownership of human capital
A)It is typically embodied in related physical capital.
B)It may be subject to government restrictions on transferability.
C)It is not generally transferable.
D)It is easily transferable to multiple individuals.

Q3) When workers do identical work,but get paid different wages,what is likely to exist
A)a compensating differential
B)an accounting error
C)no market explanation for the wage difference
D)differences that are difficult to identify

Q4) Efficiency wages will raise the quantity of labour supplied to the market.
A)True
B)False

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Page 21
Chapter 20: Income Inequality and Poverty
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Sample Questions
Q1) Who espoused the view that was later coined "liberalism"
A)Robert Nozick
B)John Stuart Mill
C)John Rawls
D)Jeremy Bentham

Q2) What does economic mobility refer to

A)the government's attempt to move monetary assistance to areas most in need
B)the ability of families to freely move to find good jobs
C)the movement of people among income classes
D)the movement of resources from one industry to another

Q3) In general,what would libertarians conclude is more important than equality

A)opportunity
B)income
C)entrepreneurial compensation
D)capital compensation

Q4) In what way does the invisible hand of the marketplace act to allocate resources
A)efficiently, but not necessarily ensuring fairness
B)not only fairly but also efficiently
C)fairly, but not necessarily ensuring efficiency
D)not only efficiently but also equitably

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Chapter 21: The Theory of Consumer Choice
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Sample Questions
Q1) When two goods are perfect substitutes,what do we know about the marginal rate of
substitution
A)It is constant.
B)It decreases as the scarcity of one good increases.
C)It increases as the scarcity of one good increases.
D)It increases as the abundance of one good increases.

Q2) Refer to Figure [Link] graph (a),if income is equal to $180,what is the price of good Y
A)$1
B)$2
C)$3
D)$4

Q3) Refer to Table [Link] receives three units of utility from the last dollar spent on
each of the other goods he [Link] cookies cost $4 per bag,how many bags of
cookies will he consume per month if he maximizes utility
A)2
B)3
C)4
D)5

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Page 23
Chapter 22: Frontiers of Microeconomics
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Sample Questions
Q1) Most economic models incorporate the assumption of rational behaviour on the part
of economic actors.
A)True
B)False

Q2) How can we use the theories of asymmetric information to analyze the 2007-2009
financial crisis

Q3) Does fairness play a fundamental role in economic models of household and firm
behaviour
A)No, an innate sense of fairness plays no role.
B)No, maximization of utility and profits play an insignificant role.
C)No, inertia plays a significant role.
D)No, consumer preferences play no role.

Q4) Researchers have found that the systematic mistakes in people's decision making
include a lack of confidence in their own abilities.
A)True
B)False

Q5) Explain the Condorcet [Link] which type of voting system does it apply?

Q6) How have insights from the field of psychology influenced the thinking of economists
in recent years

Page 24
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