market MCQs – Page 2

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

market Mcqs

21. Income inequality can be high in the free market and should be reduced This is an example of What ?
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A. Normative economic statement

B. Formative economic statement

C. Positive economic statement

D. Judicial economic statement

22. If the price in a market is fixed by the government above equilibrium ?
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A. There is excess demand

B. There is excess supply

C. There is excess equilibrium

D. There is equilibrium

23. If a maximum price is set below equilibrium there will be ?
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A. Excess demand

B. A price increase

C. Excess supply

D. A price fall

24. The law of supply states that an increase in the price of a good ?
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A. increases the quantity supplied of that good

B. decrease the quantity demanded for that good

C. decrease the demand for the good

D. increase the supply of that good

E. none of these answers

25. If the price of good is below the equilibrium price ?
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A. the quantity demanded is equal to the quantity supplied and the price remains unchanged

B. there is a surplus and the price will rise

C. there is a shortage and the price will rise

D. there is a shortage and the price will fall

26. Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today ?
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A. The impact on both price and quantity is ambiguous

B. Price will decrease, quantity is ambiguous.

C. price will increase, quantity will decrease

D. price will increase, quantity is ambiguous.

E. Price will increase, quantity will increase

27. An allocation is Pareto-efficient if no reallocation of resources would make some people _______ without making others ________?
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A. equal, unequal

B. better off; worse off

C. worse off; worse off

D. better off; better off

28. A positive externality occurs when ?
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A. The social marginal benefits are higher than the private marginal benefits

B. A product is not provided in the free market

C. The social marginal costs are higher than the private marginals costs

D. The social marginal cost equal the social marginal benefit

29. A competitive equilibrium is Pareto-efficient because ?
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A. All of the above

B. Producers are price takers

C. marginal costs and benefits are equal

D. prices equal marginal cost and benefit

E. consumers and producers face the same prices

30. Which of the following is the government most likely to subsidies ?
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A. Monopolies

B. Negative externalies

C. Oligopolies

D. Positive externalities

31. The price mechanism does not act as a ?
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A. Signal

B. Indicator of income

C. Rationing device

D. Incentive

32. VAT is a good example of which kind of tax ?
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A. Exercise duty

B. Direct

C. Specific

D. Ad valorem

33. The law of demand states that an increases in the price of a good ?
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A. increases the quantity supplied of that good

B. decreases the quantity supplied of that good

C. None of these answers

D. decreases the quantity demanded for that good

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

B. The price elasticity of supply is + 0.2

C. The price elasticity of supply is + 2

D. The price elasticity of supply is infinity

35. Except for taxes to offset ______ taxes are ______?
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A. externalities , distortionary

B. poor health, unnecessary

C. imperfect competition popular

D. inequality , a first best option

36. A shift in supply will have a bigger effect on price than output if demand is ?
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A. income elastic

B. income inelastic

C. Price elastic

D. Price inelastic

37. Suppose consumer tastes shift toward the consumption of apples Which of the following statements is an accurate description of the impact of this event on the market for apples ?
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A. There is an increase in the demand and supply of apples.

B. There is an increase in the demand for apples and an increase in the quantity supplied of apples.

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

D. There is an increase in the quantity demanded of apples and in the supply for apples

E. There is a decrease in the quantity demanded of apples and an increase in the supply for apples

38. A movement along the demand curve may be caused by ?
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A. A change in advertising

B. A change in income

C. A change in the number of buyers

D. A shift in supply

39. We cannot say whether one allocation of resources is better than another allocation because ?
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A. some people cant count

B. some people may not be permanent resident

C. We cant make value judgments to compare different peoples welfare

D. not all economic activity is legal

40. Tax incidence is the ?
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A. measure of the impact the tax has on employment and output

B. behaviour of shifting the tax to another party.

C. ultimate distribution of a taxs burden.

D. structure of the tax

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