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Economics MCQs with Explanations

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3031EconomicsMedium

A positive externality generates?

Aa social cost curve that is above the supply curve (private cost curve) for a good

Bnone of these answers

Ca social value curve that is below the demand curve (private value curve) for a good

Da social value curve that is above the demand curve (private value curve) for good

Correct answer

D. a social value curve that is above the demand curve (private value curve) for good

Explanation

The correct answer is a social value curve that is above the demand curve (private value curve) for good.

3032EconomicsMedium

The differences between a country’s merchandise exports and its merchandise imports is the?

Acurrent account

Bbalance of payments

Cbalance of trade

Dcapital account

Correct answer

C. balance of trade

Explanation

The correct answer is balance of trade.

3033EconomicsMedium

Which of the following is an example of moral hazard?

AAfter Gull buys fire insurance, he begins to smoke cigarettes in bed.

BMahmood has been feeling poorly lately so he seeks health insurance

CNone of these answers demonstrate moral hazard

DAll of these answers demonstrate moral hazard

Correct answer

A. After Gull buys fire insurance, he begins to smoke cigarettes in bed.

Explanation

The correct answer is After Gull buys fire insurance, he begins to smoke cigarettes in bed..

3034EconomicsMedium

A tax on petrol is likely to?

Acause a greater deadweight loss in the short run when compared to the long run.

Bgenerate a deadweight loss that is unaffected by the time period over which it is measured

CNone of these answers

Dcause a greater deadweight loss in the long run when compared to the short run

Correct answer

D. cause a greater deadweight loss in the long run when compared to the short run

Explanation

The correct answer is cause a greater deadweight loss in the long run when compared to the short run.

3035EconomicsMedium

Which of the following is not a component of GDP?

AConsumption by households

BPublic Spendings

CInvestment by firms

DRate of unemployment

Correct answer

D. Rate of unemployment

Explanation

Gross Domestic Product (GDP) is calculated as: GDP=C+I+G+(X−M) Where: C = Consumption by households I = Investment by firms G = Government spending X – M = Net exports The rate of unemployment is not a component of GDP because it is a labor market indicator rather than an economic activity measure.

3036EconomicsMedium

According to Lewis’s model the dual economy grows only when?

Aagricultural sector uses modern equipment

Bthe modern sector increases its output share relative to the traditional sector

Cmodern manufacturing sector is labor intensive

Dagricultural sector hires labor economically

Correct answer

B. the modern sector increases its output share relative to the traditional sector

Explanation

The correct answer is the modern sector increases its output share relative to the traditional sector.

3037EconomicsMedium

The circular flow of goods and incomes shows the relationship between?

Aincome and money

Bgoods and services.

CWages and salaries.

Correct answer

A. income and money

Explanation

The correct answer is income and money.

3038EconomicsMedium

Externalities are a problem only if?

Aall firms are perfectly competitive

Bthe externalities are negative

Call firms are monopolistic

Ddecision makers do not take them into account

Correct answer

D. decision makers do not take them into account

Explanation

The correct answer is decision makers do not take them into account.

3039EconomicsMedium

National income of a country is based on?

ASurplus of exports over imports

BThe taxes earned by the State

CThe sum of all factors of income

DPersonal incomes of all the citizens

Correct answer

C. The sum of all factors of income

Explanation

The correct answer is The sum of all factors of income.

3040EconomicsMedium

What is the contribution of forest sector in GDP?

A2.1

B3.1

C0.1%

D1.1

Correct answer

C. 0.1%

Explanation

The correct answer is 0.1%.

A positive externality generates?

Aa social cost curve that is above the supply curve (private cost curve) for a good

Bnone of these answers

Ca social value curve that is below the demand curve (private value curve) for a good

Da social value curve that is above the demand curve (private value curve) for good

Correct answer

D. a social value curve that is above the demand curve (private value curve) for good

Explanation

The correct answer is a social value curve that is above the demand curve (private value curve) for good.

Which of the following is an example of moral hazard?

AAfter Gull buys fire insurance, he begins to smoke cigarettes in bed.

BMahmood has been feeling poorly lately so he seeks health insurance

CNone of these answers demonstrate moral hazard

DAll of these answers demonstrate moral hazard

Correct answer

A. After Gull buys fire insurance, he begins to smoke cigarettes in bed.

Explanation

The correct answer is After Gull buys fire insurance, he begins to smoke cigarettes in bed..

A tax on petrol is likely to?

Acause a greater deadweight loss in the short run when compared to the long run.

Bgenerate a deadweight loss that is unaffected by the time period over which it is measured

CNone of these answers

Dcause a greater deadweight loss in the long run when compared to the short run

Correct answer

D. cause a greater deadweight loss in the long run when compared to the short run

Explanation

The correct answer is cause a greater deadweight loss in the long run when compared to the short run.

Which of the following is not a component of GDP?

AConsumption by households

BPublic Spendings

CInvestment by firms

DRate of unemployment

Correct answer

D. Rate of unemployment

Explanation

According to Lewis’s model the dual economy grows only when?

Aagricultural sector uses modern equipment

Bthe modern sector increases its output share relative to the traditional sector

Cmodern manufacturing sector is labor intensive

Dagricultural sector hires labor economically

Correct answer

B. the modern sector increases its output share relative to the traditional sector

Explanation

The correct answer is the modern sector increases its output share relative to the traditional sector.