Economics IG2 Practice MCQ 1

Which of the following is NOT a characteristic of perfect competition?

• Homogeneous products

• Many buyers and sellers

• High barriers to entry

• Perfect information

Answer explanation

High barriers to entry is NOT a characteristic of perfect competition. Perfect competition is characterized by homogeneous products, many buyers and sellers, and perfect information.

What is the difference between explicit and implicit costs?

• Explicit costs are monetary expenses, while implicit costs are non-monetary opportunity costs.

• Explicit costs are non-monetary opportunity costs, while implicit costs are monetary expenses.

• Explicit costs are all costs associated with production, while implicit costs are only variable costs.

• Implicit costs are all costs associated with production, while explicit costs are only fixed costs.

Answer explanation

Explicit costs are monetary expenses, while implicit costs are non-monetary opportunity costs.

What is the formula for calculating price elasticity of demand?

• % change in quantity demanded / % change in price

• % change in price / % change in quantity demanded

• Total revenue / Quantity demanded

• Quantity demanded / Total revenue

Answer explanation

The formula for calculating price elasticity of demand is % change in quantity demanded / % change in price. This formula measures the responsiveness of quantity demanded to changes in price.

Which of the following is an example of a public good?

• A private beach

• A toll road

• National defense

• A luxury car

Answer explanation

National defense is an example of a public good because it is provided by the government for the benefit of all citizens, regardless of their individual contributions or ability to pay.

What is the difference between a progressive tax and a regressive tax?

• A progressive tax takes a larger percentage of income from low-income individuals, while a regressive tax takes a larger percentage of income from high-income individuals.

• A progressive tax takes a larger percentage of income from high-income individuals, while a regressive tax takes a larger percentage of income from low-income individuals.

• A progressive tax takes a fixed amount of money from each individual, while a regressive tax takes a percentage of income.

• A progressive tax takes a percentage of income, while a regressive tax takes a fixed amount of money from each individual.

Answer explanation

A progressive tax takes a larger percentage of income from high-income individuals, while a regressive tax takes a larger percentage of income from low-income individuals.

What is the difference between a trade surplus and a trade deficit?

• A trade surplus occurs when a country exports more than it imports, while a trade deficit occurs when a country imports more than it exports.

• A trade surplus occurs when a country imports more than it exports, while a trade deficit occurs when a country exports more than it imports.

• A trade surplus occurs when a country has a positive balance of payments, while a trade deficit occurs when a country has a negative balance of payments.

• A trade surplus occurs when a country has a negative balance of payments, while a trade deficit occurs when a country has a positive balance of payments.

Answer explanation

A trade surplus is when a country exports more than it imports, while a trade deficit is when a country imports more than it exports.

What is the difference between a normal good and an inferior good?

• A normal good is a luxury item, while an inferior good is a necessity.

• A normal good is a necessity, while an inferior good is a luxury item.

• A normal good is a product that people buy more of as their income increases, while an inferior good is a product that people buy less of as their income increases.

• An inferior good is a product that people buy more of as their income increases, while a normal good is a product that people buy less of as their income increases.

Answer explanation

A normal good is bought more as income increases, while an inferior good is bought less. This aligns with the correct choice.

What is the difference between a fixed cost and a variable cost?

• A fixed cost is a cost that does not change with the level of output, while a variable cost is a cost that changes with the level of output.

• A fixed cost is a cost that changes with the level of output, while a variable cost is a cost that does not change with the level of output.

• A fixed cost is a cost that is incurred only in the short run, while a variable cost is a cost that is incurred only in the long run.

• A fixed cost is a cost that is incurred only in the long run, while a variable cost is a cost that is incurred only in the short run.

Answer explanation

A fixed cost does not change with output, while a variable cost changes with output.

What is the difference between a monopoly and an oligopoly?

• A monopoly is a market with many firms, while an oligopoly is a market with only one firm.

• A monopoly is a market with only one firm, while an oligopoly is a market with a few dominant

Answer explanation

A monopoly is a market with only one firm, while an oligopoly is a market with a few dominant players.

Which of the following is an example of a public good?

• A public park

• A toll bridge

• National defense

• A luxury yacht

Answer explanation

National defense is an example of a public good because it is non-excludable and non-rivalrous, benefiting everyone in society.