# MCQ on Economics for competitive exam

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Economics GK Questions for Competitive Exams. As you know Economics GK questions and answers are the very useful topic for SSC and banking
1. Cambridge International AS & A Level
ECONOMICS9708/03
Paper 3 A Level Multiple Choice For examination from 2023
SPECIMEN PAPER 1 hour 15 minutes
You will need: Multiple choice answer sheet
Soft clean eraser
Soft pencil (type B or HB is recommended)
INSTRUCTIONS
● There are thirty questions on this paper. Answer all questions.
● For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
● Write in soft pencil.
● Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
● Do not use correction fluid.
● Do not write on any bar codes.
● You may use a calculator.
INFORMATION
● The total mark for this paper is 30.
● Each correct answer will score one mark.
● Any rough working should be done on this question paper.
This document has 12 pages. Any blank pages are indicated.
2. 2
1 A project has a social cost of \$100 million, a private cost of \$40 million and an external benefit of
\$20 million. Its net social value is zero.
What can be concluded about the project?
A External cost is greater than external benefit.
B Private cost is greater than external cost.
C Private cost is greater than private benefit.
D Social cost is greater than social benefit.
2 The diagram shows the cost and revenue curves for a firm.
At which price does allocative efficiency occur?
price
MC
AC
A
B
C
D
MR AR
O
quantity
3 A government is considering building a new railway line in its country. It has to choose one of four
high-speed routes.
The benefits and costs of each route are shown below.
Which route should be chosen?
private benefits external benefits private costs external costs
\$bn \$bn \$bn \$bn
A 14 20 0.4 0.1
B 16 22 1.6 0.4
C 18 12 0.2 1
D 20 18 2 4
3. 3
4 The table shows the total utility gained by a consumer as they consume more apples.
apples consumed total utility
0 0
1 10
2 18
3 24
4 28
5 30
6 30
At which level of consumption would the marginal utility be zero?
A 1 B 4 C 5 D 6
5 In the diagram, I is a consumer’s initial indifference curve, point M is the consumer’s initial
equilibrium, JK and JL are budget lines, and MN is the substitution effect of a fall in the price of
good X.
If good X is a Giffen good, which point will be the consumer’s new equilibrium point after the fall in
the price of good X?
good Y
J
A
B
C
D
M
N
I
O K L
good X
6 What is an example of horizontal integration?
A A bank takes over a travel agent.
B A car manufacturer buys a component supplier.
C A cotton mill doubles its output of existing products.
D Two breweries merge.
© UCLES 2020 9708/03/SP/23 [Turn over
4. 4
7 The diagram shows a profit-maximising monopolist.
cost,
revenue
MC
AC
R
S
T
U
O MR AR
output
What would be the change in price if this monopolist changed from profit maximisation to revenue
maximisation?
A R to S B R to T C U to S D U to T
8 The goal of firm X is to make a minimum acceptable level of profit.
What does this describe?
A profit maximisation
B profit satisficing
C revenue maximisation
D sales maximisation
9 A monopoly firm makes only normal profit in the long run.
What is most likely to explain this?
A The firm has decreasing long-run average costs.
B The firm is a public company with numerous shareholders.
C The firm is owned by a small number of financial institutions.
D The market in this industry is highly contestable.
5. 5
10 The diagram shows the average fixed cost (AFC), average variable cost (AVC) and average total
cost (ATC) curves which are the same for three firms X, Y and Z.
DX, DY and DZ are the three respective demand curves which are different for the three firms.
All three firms seek to make a profit.
ATC
DZ
price, ATC
cost AFC AVC
DY DZ
AVC
DX DY
AFC
DX
O
quantity
Which statement is not correct?
A Firm X will choose not to produce at all.
B Firm Y is likely to operate in the long run but not in the short run.
C Firm Y is likely to operate in the short run but not in the long run.
D Firm Z will operate in both the short run and the long run.
11 When a firm increases all its inputs fourfold, its output increases threefold.
What does this illustrate?
A decreasing marginal costs
B decreasing returns to scale
C economies of scale
D the law of diminishing returns
12 Which characteristic of an industry works towards reducing the barriers to entry for new firms?
A significant advertising expenditure by existing firms
B significant economies of scale
C the absence of large costs associated with investment in capital assets
D the possession by existing firms of legal rights to produce a product (e.g. patents)
© UCLES 2020 9708/03/SP/23 [Turn over
6. 6
13 A country has a negative income tax.
The curve NT in the diagram shows the country’s initial tax schedule.
+
NT1
tax
NT
O
income

A change in the tax rate causes the schedule to shift to NT1.
How will this affect work incentives and the after-tax distribution of income?
work distribution of
incentives income
A strengthen more equal
B strengthen less equal
C weaken less equal
D weaken more equal
7. 7
14 In which labour market diagram is the economic rent of workers greatest?
A B
wage wage SL
W SL W MRPL
MRPL
O L O L
labour labour
C D
SL
wage wage SL
W W
MRPL MRPL
O L O L
labour labour
15 The government introduces a minimum wage above the equilibrium market wage rate.
How will this affect low-paid workers according to marginal revenue product (MRP) theory?
A All those initially in employment will certainly receive the new minimum wage.
B Fewer of those not already in employment will enter the labour force.
C There will be an increase in the number of low-paid workers in employment.
D Some low-paid workers will lose their jobs.
© UCLES 2020 9708/03/SP/23 [Turn over
8. 8
16 The diagram shows the change in a market when a government places a production quota OQt on
the quantity of a good that has previously traded at quantity OQ.
price S
V
W X
Z
Y
D
O Qt Q
quantity
Which welfare loss results from the government’s policy?
A W+V B W+X C X+Z D Y+Z
17 The diagram shows a production possibility curve, PPC1. The economy is initially at point X.
If the economy achieves actual economic growth but not potential growth, what would the final
position be?
capital PPC2
goods
PPC1
D
C
B
X
A
O
consumer
goods
9. 9
18 The table shows what has happened to three economic indicators between two years in a country.
When would GDP have been the most accurate measure of the standard of living in that country?
population inflation rate income distribution
A constant low and stable equal
B constant low and unstable unequal
C rising low and stable equal
D rising low and unstable unequal
19 Which change would directly affect a country’s Human Development Index (HDI)?
A a change in average hours worked by the labour force
B a change in life expectancy of the population
C a change in the level of urbanisation
D a change in the size of the population
20 The table gives unemployment rates (%) for four countries in 1993 and 2002.
UK Japan France Italy
1993 10.5 2.5 11.4 10.1
2002 5.0 5.4 8.8 8.5
What can be concluded from the table?
A France had the lowest rate of employment in both years.
B Italy had the most employed people in 2002.
C Japan more than doubled its labour productivity between 1993 and 2002.
D The UK created most jobs between 1993 and 2002.
21 A government in a high-income economy wishes to reduce cyclical unemployment.
Which policy is likely to be most effective?
A decrease government expenditure and increase income tax
B decrease the government’s budget deficit
C increase government expenditure and decrease income tax
D increase the government’s budget surplus
© UCLES 2020 9708/03/SP/23 [Turn over
10. 10
22 What does the Kuznets curve represent?
A changes in income inequality over time
B changes in the Human Development Index over time
C changes in the Multidimensional Poverty Index over time
D the inverse of a Lorenz curve
23 In an open economy with a government sector, the marginal propensity to import is 0.3, the
marginal propensity to tax is 0.3 and the marginal propensity to save is 0.2.
What is the value of the multiplier?
A 1.25 B 2 C 2.5 D 5
24 Which macroeconomic policy aims are most likely to complement one another?
A high growth and low inflation
B high growth and low unemployment
C low inflation and low unemployment
D low unemployment and a balance of trade surplus
25 The central bank of a country creates cash to purchase government bonds from the commercial
banks.
What is this called?
A liquidity preference
B quantitative easing
C supply-side policy
D the multiplier
26 Which statement about government intervention is correct?
A Government failure may result from policies that have unintended side effects.
B Governments cannot identify the existence of inefficiency.
C Inefficient government policies mean that the market system will be better at resource
allocation.
D Market failure means that government action will necessarily improve the situation.
11. 11
27 All else remaining unchanged, what would result in an outflow of capital funds from a country?
A a fall in the country’s rate of inflation
B an expected appreciation of the country’s exchange rate
C an increase in foreign interest rates
D an increase in foreign prices
28 In country X the government aims to protect jobs.
Which policy is most likely to succeed?
A decrease restrictions on immigrant labour
B decrease subsidies to domestic producers
C increase general tariffs on imports
D remove quotas on imports
29 Which row shows characteristics of a fast-growing economy?
GDP per birth rate household
capita saving ratio
A falling falling rising
B falling rising falling
C rising falling rising
D rising rising falling
30 Which adjustments to real GDP per capita might make it a more reliable indicator when comparing
standards of living in different countries?
A adjustments to allow for differences in the level of government spending in different countries
B adjustments to allow for differences in the rates of inflation in different countries
C adjustments to allow for differences in the amount of economic activity that is not reported to
the government in different countries
D adjustments to allow for differences in the value of exports from different countries