Economics
Economics MCQs with Answers and Explanations
Economics MCQs with answers and detailed explanations for CSS, PMS, lecturer and GAT tests. Micro, macro and Pakistan economy questions fully explained. Take a scored quiz instead →
Asymmetric information leads to Market Failure primarily through:
AMonopoly power and collusion
BHigh fixed production costs
CAdverse Selection and Moral Hazard
DGovernment regulation and taxes
The substitution effect of a price change according to Hicks is isolated by keeping:
AReal income (utility level) constant
BNominal money income constant
CTotal expenditure constant
DMarginal utility of money constant
Slutsky’s substitution effect differs from Hicks’s because Slutsky holds constant the consumer’s:
AUtility level
BPurchasing power (ability to buy the original basket of goods)
CMarginal rate of substitution
DNominal income without any tax adjustment
An Engel Curve shows the relationship between:
AQuantity demanded of a good and its market price
BQuantity supplied of a good and factor costs
CQuantity demanded of a good and consumer income level
DPrice of a good and price of its substitute
If the income elasticity of demand for a good is negative, the good is classified as an:
ANormal good
BLuxury good
CNecessity good
DInferior good
The Envelope Curve in cost theory refers to the firm’s:
ALong-Run Average Cost (LRAC) curve
BShort-Run Marginal Cost (SMC) curve
CAverage Variable Cost (AVC) curve
DTotal Fixed Cost (TFC) curve
In the long run, a firm under monopolistic competition operates where demand (AR) is tangent to the:
AMinimum point of the LRAC curve
BLong-Run Average Cost (LRAC) curve on its downward-sloping segment
CMarginal Cost curve at its peak
DTotal Cost curve at the origin
The Stackelberg Model of oligopoly differs from the Cournot model because firms:
AMove simultaneously setting prices
BCollude explicitly to form a cartel
CMove sequentially as a leader and a follower firm
DFace a completely vertical demand curve
In game theory, a Dominant Strategy is defined as a strategy that:
AIs optimal only if the competitor cooperates
BMaximizes joint payouts for all players combined
CGuarantees zero loss under all conditions
DYields the best outcome for a player regardless of what the competitor chooses
A Nash Equilibrium in game theory occurs when:
ANo player has an incentive to unilaterally change their chosen strategy
BBoth players achieve maximum theoretical payouts
CPlayers alternate choices in every round
DOne player forces the other to exit