Economics study desk with supply and demand curves, scales and an economic city model

Focused topic practice

market MCQs

Practise focused market questions with marked answers for exam preparation and subject revision.

market Mcqs
1. If the price of a good is above the equilibrium price ?
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A. there is a surplus and the price will fall

B. there is a surplus and the price will rise

C. there is a shortage and the price will rise

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

E. there is a shortage and the price will fall

2. If the price of good is equal to the equilibrium price ?
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A. there is a surplus and the price will fall

B. there is a shortage and the price will rise

C. there is surplus and the price will rise

D. the quantity demanded is equal to the quantity supplied supplied and the price remains unchanged

E. there is a shortage and the price will fall

3. A shift is demand will have more effect on price than quantity if ?
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A. The price elasticity of supply is price elastic

B. The price elasticity of supply is infinity

C. The price elasticity of supply is perfectly elastic

D. The price elasticity of supply is price inelastic

4. The effect of a tax to offset a negative externality will be to ____ price and ______ quantity?
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A. reduce, increase

B. increase, reduce

C. increase, increase

D. reduce , reduce

5. Externalities arise because there is a divergence between ________ and _________?
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A. social costs, social benefit

B. private costs, private benefits

C. insiders, outsiders

D. private costs, social costs or benefits
6. A decrease in demand for a products should ?
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A. Decrease equilibrium price and quantity

B. Decrease equilibrium price and increase quantity

C. Increase equilibrium price and decrease quantity

D. increase equilibrium price and quantity

7. A perfectly competitive market has ?
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A. many buyers and sellers.

B. only one seller.

C. firms that set their own prices

D. at least a few sellers.

8. Economists use the term Black Markets for situations where ?
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A. goods are sold at prices above legal or official price.

B. transactions are not recorded in the GDP figures.

C. illegal substances are sold

D. buyers and/or sellers are not paying taxes as they should

9. All of the following are types of imperfect competition except ?
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A. monopoly

B. unfair competition

C. oligopoly

D. monopolistic competition

10. Tax shifting ?
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A. occurs when house hold can alter their behaviour and do something to avoid paying a tax.

B. occurs when taxes cause prices to increase but wages to fall

C. is the ultimate distribution of a taxs burden

D. is the way in which a tax is structured

11. Market failure may arise because of ?
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A. all of the above

B. taxation

C. imperfect competition

D. externalities

E. missing markets

12. A dominant strategy is ?
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A. a players best strategy whatever the strategies adopted by rivals

B. a players best strategy when moving first

C. a losing strategy

D. a wining strategy

13. The allocation of resources is not efficient if ?
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A. unemployment is high

B. the marginal cost of production does not equal societys marginal benefit

C. the distribution is inequitable

D. economic growth is low

14. Which of the following statements is true about the impact of an increase in the price of lettuce ?
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A. Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall

B. The supply of lettuce will decrease

C. The demand for lettuce will decrease

D. The equilibrium price and quantity of salad dressing will fall

E. The equilibrium price and quantity of salad dressing will rise

15. A reduction in the costs of production will ?
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A. Shift the supply curve

B. Lead to an extension of supply

C. Lead to a movement along the supply curve

D. Shift the demand curve

16. In the insurance industry, high-risk customers are more likely to take out insurance. This is an example of ?
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A. risk aversion

B. adverse selection

C. moral hazard

D. a poor gamble

17. Nationalisation occurs when ?
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A. The government taxes a product to a raise its price

B. The government sells assets to a the private sector

C. The government bans a product

D. The government takes control of an industry
18. An increase in demand for a product should ?
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A. Increase equilibrium price and decrease quantity

B. Increase equilibrium price and quantity

C. Decrease equilibrium price and quantity

D. Decrease equilibrium price and increase quantity
19. Which best describes consumer surplus ?
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A. The profits made by a firm

B. The cost of providing a unit

C. The price consumers are willing to pray for a unit

D. The difference the price a consumer pays for an item and the price he/she is willing to pay
20. Where a tax can be shifted, the incidence depends on ?
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A. how many producers there are:

B. who is legally obliged to pay the tax

C. Whether there is perfect or imperfect information

D. elasticities of demand and supply