Introduction to Economics - Multiple
Choice Exam Questions with correct
answers 100% 2026
If the quantity demanded of tea increases by 4 per cent when the price of coffee increases by 2
per cent, the cross-price elasticity of demand between tea and coffee is:
A) (4/2) = +2.0
B) (-2/4) = -0.5
C) (4 x 2) = +8.0
D) (2/4) = +0.5 - Correct Answers A
If you expect the economy is going to boom and that average income in the economy will rise in
the foreseeable future, the type of firm that would be likely to be able to increase its sales the
most if your expectations are met is one that sells:
A) an elastic good.
B) an inferior good.
C) a luxury good.
D) a necessity good. - Correct Answers C
Which of the following would you expect to occur as the result of a price ceiling in the
apartment rental market?
A) The rental market will gradually move toward equilibrium, as the price falls due to the
surplus.
B) Discrimination as landlords choose their tenants, possibly based on gender, race or age.
,C) A reallocation of resources to the rental market to meet the increased demand for rental
accommodation.
D) The rental market will gradually move toward equilibrium, as the price for rental apartments
will rise due to the shortage. - Correct Answers B
What does tax incidence refer to?
A) Who is responsible for sending the tax money to the government.
B) Which government agency actually receives the tax revenue.
C) Who actually bears the burden of the tax.
D) What commodity is being taxed. - Correct Answers C
The income elasticity for inferior goods is always:
A) equal to one.
B) positive in value.
C) impossible to determine.
D) negative in value. - Correct Answers D
If the price of petrol increases by 30 per cent and this causes the quantity demanded to fall by
15 per cent, the elasticity of demand is equal to:
A) minus 450.
B) minus 15.
C) minus 0.5.
D) minus 2 - Correct Answers C
, If a firm lowered the price of the product it sells and found that total revenue did not change,
then the demand for its product is:
A) relatively elastic.
B) perfectly elastic.
C) perfectly inelastic.
D) unit-elastic. - Correct Answers D
If the market price is $25 in a perfectly competitive market, the marginal revenue from selling
the fifth unit is:
A) $5
B) $12.50
C) $25
D) $125 - Correct Answers C
A firm would decide to shut down if its production resulted in:
A) AFC > AVC.
B) MR < AVC.
C) MR < ATC.
D) ATC > AVC. - Correct Answers B
If a typical firm in a perfectly competitive industry is incurring losses, then:
A) all firms will continue to lose money.
Choice Exam Questions with correct
answers 100% 2026
If the quantity demanded of tea increases by 4 per cent when the price of coffee increases by 2
per cent, the cross-price elasticity of demand between tea and coffee is:
A) (4/2) = +2.0
B) (-2/4) = -0.5
C) (4 x 2) = +8.0
D) (2/4) = +0.5 - Correct Answers A
If you expect the economy is going to boom and that average income in the economy will rise in
the foreseeable future, the type of firm that would be likely to be able to increase its sales the
most if your expectations are met is one that sells:
A) an elastic good.
B) an inferior good.
C) a luxury good.
D) a necessity good. - Correct Answers C
Which of the following would you expect to occur as the result of a price ceiling in the
apartment rental market?
A) The rental market will gradually move toward equilibrium, as the price falls due to the
surplus.
B) Discrimination as landlords choose their tenants, possibly based on gender, race or age.
,C) A reallocation of resources to the rental market to meet the increased demand for rental
accommodation.
D) The rental market will gradually move toward equilibrium, as the price for rental apartments
will rise due to the shortage. - Correct Answers B
What does tax incidence refer to?
A) Who is responsible for sending the tax money to the government.
B) Which government agency actually receives the tax revenue.
C) Who actually bears the burden of the tax.
D) What commodity is being taxed. - Correct Answers C
The income elasticity for inferior goods is always:
A) equal to one.
B) positive in value.
C) impossible to determine.
D) negative in value. - Correct Answers D
If the price of petrol increases by 30 per cent and this causes the quantity demanded to fall by
15 per cent, the elasticity of demand is equal to:
A) minus 450.
B) minus 15.
C) minus 0.5.
D) minus 2 - Correct Answers C
, If a firm lowered the price of the product it sells and found that total revenue did not change,
then the demand for its product is:
A) relatively elastic.
B) perfectly elastic.
C) perfectly inelastic.
D) unit-elastic. - Correct Answers D
If the market price is $25 in a perfectly competitive market, the marginal revenue from selling
the fifth unit is:
A) $5
B) $12.50
C) $25
D) $125 - Correct Answers C
A firm would decide to shut down if its production resulted in:
A) AFC > AVC.
B) MR < AVC.
C) MR < ATC.
D) ATC > AVC. - Correct Answers B
If a typical firm in a perfectly competitive industry is incurring losses, then:
A) all firms will continue to lose money.
