O Level Economics chapter 3: Microeconomic decision-makers MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

100 exam-style questions on Microeconomic decision-makers, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.

100 questions · 7 topics · 10 per test

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What chapter 3 covers

Ten Microeconomic decision-makers questions with answers

Try each one, then open the answer. These ten stay the same; the test draws new ones every time.

1. What is meant by labour productivity?

  1. A
    the output produced per worker in a given period of time
  2. B
    the number of hours each worker works in a week
  3. C
    the total output produced by all the workers in a firm
  4. D
    the total wages paid for each unit of output
Show answer

Answer: A. Productivity measures efficiency: output per worker (or per hour worked). The total output of all workers is production, not productivity.

2. A shop shows the prices of all its goods in rupees, so customers can easily compare their values. Which function of money does this show?

  1. A
    standard of deferred payment
  2. B
    store of value
  3. C
    unit of account
  4. D
    medium of exchange
Show answer

Answer: C. As a unit of account (measure of value), money gives a common way of pricing and comparing the value of different goods. The goods have not yet been bought, so this is not money acting as a medium of exchange.

3. A firm increases its workforce from 50 to 60 workers, and its daily output rises from 1,000 units to 1,080 units. Which statement is correct?

  1. A
    production has risen and labour productivity is unchanged
  2. B
    production has risen but labour productivity has fallen
  3. C
    production and labour productivity have both risen
  4. D
    production has fallen but labour productivity has risen
Show answer

Answer: B. Total output (production) rose by 80 units, but output per worker fell from 1,000 ÷ 50 = 20 to 1,080 ÷ 60 = 18 units. More output does not always mean higher productivity.

4. Which of these is an example of capital-intensive production?

  1. A
    a car plant where robots weld and paint the car bodies
  2. B
    a tailoring shop where each suit is cut and stitched by hand
  3. C
    a tea estate where the leaves are picked by hand
  4. D
    a restaurant where cooks prepare every dish to order
Show answer

Answer: A. Capital-intensive production uses a high proportion of machinery compared with labour. The other three rely mainly on workers, so they are labour-intensive.

5. On a cost diagram, the vertical gap between the average total cost (ATC) curve and the average variable cost (AVC) curve becomes smaller as output rises. Why?

  1. A
    total variable cost falls as output rises
  2. B
    average fixed cost falls as output rises
  3. C
    total fixed cost falls as output rises
  4. D
    average variable cost rises as output rises
Show answer

Answer: B. ATC = AFC + AVC, so the gap between the ATC and AVC curves is AFC. AFC keeps falling because a constant fixed cost is spread over more units. Total fixed cost itself does not change.

6. On a diagram with output on the horizontal axis and cost on the vertical axis, which cost is drawn as a horizontal straight line?

  1. A
    average fixed cost
  2. B
    total variable cost
  3. C
    total fixed cost
  4. D
    average total cost
Show answer

Answer: C. Total fixed cost is the same at every level of output, so it is a horizontal line. Average fixed cost falls continuously as output rises, because the same fixed cost is shared among more units.

7. What is a disadvantage to a firm of capital-intensive production?

  1. A
    it requires a high initial cost to buy and install equipment
  2. B
    it usually produces goods of less consistent quality
  3. C
    its total wage bill rises quickly whenever its output increases
  4. D
    it prevents the firm from gaining economies of scale
Show answer

Answer: A. Machinery is expensive to buy, and a breakdown can halt production. Capital-intensive methods usually give more consistent quality and help, rather than prevent, economies of scale.

8. Why is it important for a central bank to supervise commercial banks?

  1. A
    it lets the central bank decide each customer's loan
  2. B
    it ensures that every bank makes the same profit
  3. C
    it guarantees that no bank ever makes a loss
  4. D
    it helps keep banks stable and deposits safe
Show answer

Answer: D. Supervision checks that banks keep enough reserves and do not take excessive risks, protecting savers and confidence in the banking system. It does not remove all losses or control individual loans.

9. Which problem of barter does money solve?

  1. A
    the need for a double coincidence of wants
  2. B
    the need to pay interest on loans
  3. C
    the tendency for prices to rise over time
  4. D
    the need for a central bank to issue notes
Show answer

Answer: A. Under barter, each trader must find someone who has what they want and wants what they have. Money removes this need because everyone accepts it.

10. Which firm is in both the private sector and the tertiary sector?

  1. A
    a privately owned fertiliser factory
  2. B
    a state-owned railway
  3. C
    a state-owned gas field
  4. D
    a privately owned hospital
Show answer

Answer: D. A private hospital is owned by private individuals or shareholders and provides a service. The railway and gas field are public sector, and the fertiliser factory is in the secondary sector.

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Microeconomic decision-makers: questions students ask

How many Microeconomic decision-makers MCQs are there?

100, each with the answer and a short explanation, across 7 topics: Money and banking, Households, Workers, Firms, Firms and production, Firms’ costs, revenue and objectives, Types of markets. Every chapter test draws ten of them, so you can take it many times.

Is the O Level Economics chapter 3 test free?

Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.

How is the chapter test marked?

The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.

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