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Economics MCQs with Explanations

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61EconomicsMedium

If regulators break up a natural monopoly into many smaller firms, the cost of production?

Awill rise

Bwill remain the same

Cwill fall

Dcould either rise or fall depending on the elasticity of the monopolist’s supply curve

Correct answer

A. will rise

Explanation

The correct answer is will rise.

62EconomicsMedium

If the demand for money depends on the interest rate the velocity of circulation is?

Anot constant and the quantity theory of money does hold.

Bnot constant and the quantity theory of money does not hold.

Cconstant and the quantity theory of money does not hold.

Dconstant and the quantity theory of money does hold.

Correct answer

B. not constant and the quantity theory of money does not hold.

Explanation

The correct answer is not constant and the quantity theory of money does not hold..

63EconomicsMedium

David Ricardo’s theory in favor of free trade uses the ideal of?

Acomparative advantage

Bmultilateral advantage

Cmutual advantage

Dabsolute advantage

Correct answer

A. comparative advantage

Explanation

The correct answer is comparative advantage.

64EconomicsMedium

The social costs of monopoly power arises because?

Amarginal consumer benefit is less than marginal revenue

Bmarginal cost is set equal to marginal revenue

Cthere is too little output at too high a cost

Dprice is less than marginal cost

Correct answer

C. there is too little output at too high a cost

Explanation

The correct answer is there is too little output at too high a cost.

65EconomicsMedium

Which one of the following is the largest sector of Pakistan’s economy?

ABanking

BAgriculture

CManufacturing

DIndustry

Correct answer

B. Agriculture

Explanation

The correct answer is Agriculture.

66EconomicsMedium

A tariff that prohibits imports has only?

Aconsumption effect and protection effect

Brevenue effect and protection effect

Credistribution effect and consumption effect

Da revenue effect and redistribution effect

Correct answer

A. consumption effect and protection effect

Explanation

The correct answer is consumption effect and protection effect.

67EconomicsMedium

Net transfers are________?

Ainvestment loans, and grants from overseas minus international resource outflows

Binternational resource outflows minus international balance of payments and profit remittances

Cforeign direct investment inflow minus investment loans and grants from overseas

Dnet international resource flows minus net international interest payments and profit remittances

Correct answer

D. net international resource flows minus net international interest payments and profit remittances

Explanation

The correct answer is net international resource flows minus net international interest payments and profit remittances.

68EconomicsMedium

The law of demand states that an increases in the price of a good?

ANone of these answers

Bincreases the quantity supplied of that good

Cdecreases the quantity supplied of that good

Ddecreases the quantity demanded for that good

Correct answer

C. decreases the quantity supplied of that good

Explanation

The correct answer is decreases the quantity supplied of that good.

69EconomicsMedium

Mention the theory of inflation or price increase that results from so-called excess demand?

ADemand push inflation

BDemand curve theory

CCost-push inflation

DDemand-pull inflation

Correct answer

D. Demand-pull inflation

Explanation

The correct answer is Demand-pull inflation.

70EconomicsMedium

Central banks in LDCs generally have less effect on expenditure and output than in LDCs because of?

AI, II, III and IV

BI and II only

CI, II and III only

DIII and IV only

Correct answer

A. I, II, III and IV

Explanation

The correct answer is I, II, III and IV.

If the demand for money depends on the interest rate the velocity of circulation is?

Anot constant and the quantity theory of money does hold.

Bnot constant and the quantity theory of money does not hold.

Cconstant and the quantity theory of money does not hold.

Dconstant and the quantity theory of money does hold.

Correct answer

B. not constant and the quantity theory of money does not hold.

Explanation

The correct answer is not constant and the quantity theory of money does not hold..

The social costs of monopoly power arises because?

Amarginal consumer benefit is less than marginal revenue

Bmarginal cost is set equal to marginal revenue

Cthere is too little output at too high a cost

Dprice is less than marginal cost

Correct answer

C. there is too little output at too high a cost

Explanation

The correct answer is there is too little output at too high a cost.

Net transfers are________?

Ainvestment loans, and grants from overseas minus international resource outflows

Binternational resource outflows minus international balance of payments and profit remittances

Cforeign direct investment inflow minus investment loans and grants from overseas

Dnet international resource flows minus net international interest payments and profit remittances

Correct answer

D. net international resource flows minus net international interest payments and profit remittances

Explanation

The correct answer is net international resource flows minus net international interest payments and profit remittances.