PakQuizHub

Show Answers

Correct options are highlighted when revealed.

1.Which of the following is a classic example of a public good?

City bus servicesGovernment-funded healthcareNational securityTrain services

2.Which of the following factors can lead to market failure?

3.When a neighbor burns yard debris and smoke enters your home, what type of externality does this represent?

An externality related to production activitiesA suboptimal or second-best outcomeCosts associated with making a transactionAn externality arising from consumptionNone of the above

4.Why is a competitive equilibrium considered Pareto efficient?

Because producers accept prices without influenceSince both consumers and producers encounter identical pricesDue to the equality of marginal costs and marginal benefitsAs market prices match both marginal costs and marginal benefitsAll of the above reasons combined

5.Within the insurance sector, individuals who pose a greater risk tend to purchase insurance more frequently. What concept does this illustrate?

moral hazardaversion to riskadverse selectionan unwise bet

6.In a Nash equilibrium, how does each player select their strategy?

By presuming other players have acted before themBy choosing a strategy overshadowed by opponentsBy selecting the optimal strategy based on others' choicesBy opting for a strategy that serves as a believable threat

7.In a contestable market, how must existing companies act to prevent new competitors from entering?

operate as if in a perfectly competitive marketcollaborate with each othermake their products distinctuse price discrimination strategies

8.Which of the following is NOT classified as a form of imperfect competition?

Monopolistic competitionOligopolyMonopolyUnfair competition

9.What does tax shifting refer to?

The method used to design a tax systemThe final allocation of who bears the tax burdenThe situation where taxes lead to higher prices but lower wagesWhen households change their actions to evade paying a tax

10.Which type of externality is the government most inclined to provide financial support for?

11.The government plans to impose a tax on cigarettes to generate funds for healthcare benefits. Given that cigarette demand is currently price inelastic, which of the following statements is correct?

This tax will generate minimal revenue in both the short run and long run because demand is price inelastic.Over time, the tax may yield less revenue than expected since cigarette demand is likely to become more sensitive to price changes.This approach is highly effective for raising revenue in both the immediate and distant future, as there are no alternatives to cigarettes.No tax revenue will be collected because cigarette sellers will reduce prices by the tax amount, leaving consumer prices unchanged.The tax will immediately eliminate cigarette consumption due to high price sensitivity.

12.Which of the following is considered an indirect tax?

Value Added Tax (VAT)Tax on inheritancePersonal income taxCorporate profits tax

13.What would economists expect to happen if the government sets a minimum wage for adult employees?

Overall wages would decrease as companies attempt to reduce expensesEmployment opportunities for younger workers would declineBusinesses that rely on low-wage labor would face higher costs and increased pricesThe level of unemployment would rise

15.According to economic principles, when is rationing necessary?

When inflation takes placeIn the presence of externalitiesDuring the production of merit goodsWhen demand surpasses supplyWhen government intervention is minimal

16.What is the result when a price ceiling is established below the market equilibrium price?

Prices will decreasePrices will riseThere will be a shortage of goodsThere will be a surplus of goods

17.Which characteristic defines a public good?

It is supplied by governmental authoritiesIt is available at no chargeIt is both non-excludable and non-rivalrous in consumptionIt generates external costsIt is privately owned

18.Why do agricultural prices often experience significant fluctuations?

Because supply responds strongly to price changesBecause demand varies greatly with price shiftsBecause the supply remains constant over timeBecause both demand and supply have low responsiveness to price changesBecause government policies regulate prices strictly

19.What happens in a market when the government sets a price higher than the equilibrium price?

20.When does a positive externality take place?

When the social marginal costs exceed the private marginal costsWhen a good is absent from the free marketWhen social marginal cost matches social marginal benefitWhen social marginal benefits surpass private marginal benefits

Market – MCQs