MCQs of Economics - Markets, Efficiency And The Public Interest – Multiple Choice Question

Question 1 of 20

1. Question

If PX > MCX, society gains by:

raising the price of X.
production less X
Producing more X
Increasing the cost of producing X

Question 2 of 20

2. Question

If some gain and some lose as the result of a proposed change and it can be demonstrated that the value of the gains would exceed the value of the losses then the change is said to be:

technically efficient.
inefficient.
potentially efficient
unequivocally Pareto optimal

Question 3 of 20

3. Question

The total cost to society of producing an additional unit of a good or service is the:

marginal damage cost
marginal social cost
marginal private cost
marginal external cost

Question 4 of 20

4. Question

A person will continue to pursue an activity up to the point where:

Marginal benefit equals marginal damage cost
marginal benefits equals marginal social cost
marginal benefit equals marginal private cost
marginal social cost equals marginal external cost

Question 5 of 20

5. Question

When you consume good Q, not only do you benefit form consuming the good but other people benefit from your consumption as well, if firms produce good Q where P = MC, firms will be producing

less than the efficient level of output
more than the efficient level of output
so that consumer surplus is zero
the efficient level of output

Question 6 of 20

6. Question

Externalities are a problem only if:

decision makers do not take them into account
all firms are perfectly competitive
the externalities are negative
all firms are monopolistic

Question 7 of 20

7. Question

The government increase the minimum wage. The National Association of Fast Food Restaurants hires you to determine the impact that this higher minimum wage will have on it industry. This is an example of:

industry equilibrium analysis
specific equilibrium analysis
partial equilibrium analysis
general equilibrium analysis

Question 8 of 20

8. Question

The statement every thing affects every thing else reflects the principle behind:

efficiency analysis
partial equilibrium analysis
general equilibrium analysis
equity analysis

Question 9 of 20

9. Question

The conclusion that free, unregulated markets will produce an efficient outcome breaks down if:

households do not have perfect information
firms are not price takers in input markets
firms are not price takers in the output market
all of the above

Question 10 of 20

10. Question

imperfect competition occurs:

When firms are not profit maximisers
When firms have some control over price and competition
When the consumption of the good involves an external benefit
Whenever firms are losing money.

Question 11 of 20

11. Question

Private goods are:

non-rival in consumption and their benefits are nonexcludable:
rival in consumption and their benefits are excludable
rival in consumption and their benefits are non-excludable
non-rival in consumption and their benefits excludable

Question 12 of 20

12. Question

The whole class of goods that will be under produced or not produced at all in a completely unregulated market economy are referred to as:

Pareto goods
public goods
private goods
free goods

Question 13 of 20

13. Question

An example of public good is:

a beautifully landscaped lawn.
preservation of wetlands
a public utility.
a book

Question 14 of 20

14. Question

The optimal level of provision of public goods is where society total willingness to pay per unit is equal to the:

variable cost of producing the good
average cost of producing the good
marginal cost of producing the good
total cost of producing the good

Question 15 of 20

15. Question

If one person’s enjoyment of the benefits of a good does not interfere with another’s consumption of it, the good is said to be:

limitless in utility
non-rival in consumption
congestible in consumption
non-excludable

Question 16 of 20

16. Question

Because public goods are characterised by being collectively consumed:

the private sector may not provide them because they cannot exclude those who do not pay
they are very expensive thus the private sector cannot provide them
the government cannot produce them
they are illegal.

Question 17 of 20

17. Question

If a large number of individuals are affected by an external benefit, private bargaining will not work because of:

non-rivalry
the free-rider problem
the Coase theorem
the fallacy of composition

Question 18 of 20

18. Question

The Coase theorem states that:

public goods should be produced up to the point where the additional benefit received by society equals the additional cost of producing the good
under certain conditions, private parties can arrive at the efficient solution without government involvement
the private sector will fail to produce the efficient amount of a public good because of the free-rider problem.
if there are external costs in production the government must intervene in the market to assure that the efficient level of output is produced

Question 19 of 20

19. Question

The idea that when externalities are present private parties can arrive at the efficient solution without government intervention under certain circumstance is known as:

The coase theorem
Arrow's impossibility theorem
the drop -in-the bucket problem.
the free rider problem

Question 20 of 20

20. Question

Markets fail to produce an efficient allocation of resources, but government also fail because:

elected officials will act selflessly for the good of society and ignore their own self interest
the managers of government agencies are trying to maximize the profit of their agency and they ignore the implications that this has on other departments
the optimal level of public goods may be too expensive for the society to produce
the measurement of social damages and benefits is difficult and imprecise

MCQs of Economics – Markets, Efficiency And The Public Interest

Economics - Markets, Efficiency And The Public Interest

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