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Lebanese Baccalaureate - Economics & Sociology (SE) study materials
Lebanese Baccalaureate - Economics & Sociology (SE) study resources

Lebanese Baccalaureate - Economics & Sociology (SE) practice questions

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Question 1Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

According to the law of demand, when the price of a good rises, all other things equal, the quantity demanded of that good:

  1. falls Correct answer.
  2. rises then falls
  3. stays unchanged
  4. rises

Explanation

The law of demand states an inverse relationship between price and quantity demanded, holding other factors constant. A higher price reduces the quantity buyers are willing and able to purchase.

Question 2Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A movement upward along a given demand curve is caused by:

  1. a change in consumer tastes
  2. an increase in consumer income
  3. an increase in the good's own price Correct answer.
  4. a decrease in the good's own price

Explanation

Movements along a demand curve are caused only by changes in the good's own price. Changes in income or tastes shift the entire curve instead.

Question 3Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

If the price of coffee rises and, as a result, the demand for tea increases, the two goods are:

  1. inferior goods
  2. substitutes Correct answer.
  3. complements
  4. independent goods

Explanation

Substitutes are goods used in place of one another; a price rise in one raises demand for the other. Complements show the opposite relationship.

Question 4Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

The supply curve of a normal good typically slopes upward because:

  1. producers seek to sell less at higher prices
  2. costs fall automatically as output expands
  3. consumers buy more at higher prices
  4. higher prices make production more profitable, attracting more output Correct answer.

Explanation

A higher price raises the profitability of each unit, giving producers an incentive to expand output. This produces a positive price-quantity relationship.

Question 5Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

Market equilibrium occurs at the price where:

  1. quantity demanded exceeds quantity supplied
  2. quantity supplied exceeds quantity demanded
  3. quantity demanded equals quantity supplied Correct answer.
  4. the price is at its historical maximum

Explanation

Equilibrium is the price at which the plans of buyers and sellers coincide, so quantity demanded equals quantity supplied. At any other price a shortage or surplus pushes price toward that point.

Question 6Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

Price elasticity of demand is defined as the:

  1. change in price divided by the change in quantity demanded
  2. percentage change in quantity demanded divided by the percentage change in price Correct answer.
  3. percentage change in price divided by the percentage change in quantity demanded
  4. ratio of the change in quantity to the change in price

Explanation

Elasticity is a unit-free measure comparing percentage changes, not absolute changes. The formula uses percentage change in quantity demanded over percentage change in price.

Question 7Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A producer's total revenue equals:

  1. quantity divided by price
  2. total cost minus profit
  3. price multiplied by quantity sold Correct answer.
  4. average cost multiplied by price

Explanation

Total revenue is the money received from sales, computed as price times quantity sold. It is the basis for analysing how price changes affect a firm's receipts.

Question 8Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A consumer's budget constraint shows:

  1. the combinations of goods that yield equal satisfaction
  2. the quantity supplied at each price
  3. the maximum satisfaction attainable at any income
  4. the combinations of goods affordable given income and prices Correct answer.

Explanation

The budget line represents all combinations of goods whose total cost exactly equals the consumer's income. Points beyond it are unaffordable and points inside it leave income unspent.

Question 9Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

If a 10% increase in price leads to a 20% decrease in quantity demanded, the price elasticity of demand (in absolute value) is:

  1. 1.0
  2. 0.5
  3. 10.0
  4. 2.0 Correct answer.

Explanation

Elasticity equals the percentage change in quantity demanded divided by the percentage change in price, so 20% ÷ 10% = 2. A value above 1 indicates elastic demand.

Question 10Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

Demand for a good is likely to be more elastic when:

  1. the good has many close substitutes Correct answer.
  2. the good is a necessity with no alternatives
  3. the good is a small share of the consumer's budget
  4. the time period under consideration is very short

Explanation

The availability of close substitutes makes it easy for consumers to switch when price rises, raising elasticity. Necessities, small budget shares, and short time horizons all tend to reduce elasticity.

Question 11Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

When demand is inelastic, a price increase will cause total revenue to:

  1. rise Correct answer.
  2. remain constant
  3. fall
  4. fall to zero

Explanation

With inelastic demand the quantity falls proportionally less than the price rises, so total revenue increases. The price effect dominates the quantity effect.

Question 12Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A price ceiling set below the equilibrium price will typically produce:

  1. a surplus of the good
  2. an immediate return to equilibrium
  3. higher quantity supplied than demanded
  4. a shortage of the good Correct answer.

Explanation

A binding ceiling holds price below equilibrium, so quantity demanded exceeds quantity supplied. This excess demand appears as a shortage.

Question 13Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

An increase in the price of a raw material used in production will shift the supply curve:

  1. to the left, raising equilibrium price Correct answer.
  2. along the curve without shifting it
  3. to the right, raising equilibrium quantity
  4. to the right, lowering equilibrium price

Explanation

Higher input costs reduce profitability at every price, so producers offer less and supply shifts left. The resulting scarcity raises the equilibrium price.

Question 14Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

If both demand and supply increase simultaneously, the effect on equilibrium quantity is:

  1. a decrease, while the price change is indeterminate
  2. an increase, while the price change is indeterminate Correct answer.
  3. a decrease, and the price definitely falls
  4. an increase, and the price definitely rises

Explanation

Both shifts push quantity in the same direction, so quantity unambiguously rises. Their effects on price oppose each other, making the price outcome depend on the relative magnitudes.

Question 15Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A consumer reaches equilibrium in the two-good model when:

  1. marginal utility per unit of money spent is equal across goods Correct answer.
  2. total utility from each good is equal
  3. the prices of the two goods are equal
  4. the budget is fully spent on the cheaper good

Explanation

Utility maximisation requires equal marginal utility per unit of expenditure across goods. If one good offered more utility per unit of money, the consumer could gain by reallocating spending.

Question 16Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

The marginal rate of substitution between two goods measures:

  1. the ratio of the prices of the two goods
  2. the total satisfaction from consuming both goods
  3. the rate at which a consumer will trade one good for another while keeping satisfaction constant Correct answer.
  4. the rate at which firms substitute inputs in production

Explanation

The marginal rate of substitution is the slope of an indifference curve, showing the trade-off that leaves utility unchanged. At the optimum it equals the price ratio.

Question 17Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A good is classified as inferior when:

  1. its demand rises as consumer income rises
  2. its price falls as income rises
  3. its demand is unaffected by income
  4. its demand falls as consumer income rises Correct answer.

Explanation

For an inferior good, higher income leads consumers to switch toward preferred alternatives, reducing demand. Normal goods show the opposite income relationship.

Question 18Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

If the cross-price elasticity of demand between two goods is negative, the goods are:

  1. substitutes
  2. complements Correct answer.
  3. inferior
  4. unrelated

Explanation

A negative cross-price elasticity means a price rise in one good reduces demand for the other, as happens with goods consumed together. Substitutes show positive cross-price elasticity.

Question 19Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A firm faces demand with price elasticity of 0.4. To increase total revenue, the firm should:

  1. cut output to zero
  2. raise its price Correct answer.
  3. keep its price unchanged
  4. lower its price

Explanation

With inelastic demand, raising price increases revenue because quantity falls proportionally less than price rises. Lowering price would reduce revenue in this case.

Question 20Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

An increase in consumers' income shifts the demand curve for a normal good to the right. The new equilibrium will show:

  1. lower price and higher quantity
  2. higher price and lower quantity
  3. higher price and higher quantity Correct answer.
  4. lower price and lower quantity

Explanation

A rightward demand shift moves the intersection with the upward-sloping supply curve up and to the right. Both equilibrium price and quantity rise.

Question 21Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A price floor set above the equilibrium price results in:

  1. no effect, because markets always clear
  2. an increase in quantity demanded
  3. a surplus, because quantity supplied exceeds quantity demanded Correct answer.
  4. a shortage, because buyers cannot afford the good

Explanation

A binding floor holds price above equilibrium, so sellers offer more than buyers will purchase. The excess supply appears as a surplus.

Question 22Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

When the price of a good falls along a linear demand curve, total revenue is maximised at the point where:

  1. demand is unit-elastic Correct answer.
  2. price is highest
  3. quantity is highest
  4. demand is perfectly inelastic

Explanation

Revenue rises while demand is elastic and falls once demand becomes inelastic, so the maximum occurs at unit elasticity. This is the midpoint of a linear demand curve.

Question 23Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A consumer spends a fixed budget on goods X and Y. If the marginal utility of X per unit of money exceeds that of Y, the consumer should:

  1. keep the current combination unchanged
  2. buy more X and less Y to raise total utility Correct answer.
  3. stop buying both goods
  4. buy more Y and less X to raise total utility

Explanation

Reallocating spending toward the good with higher marginal utility per unit of money increases total utility. The consumer continues until the ratios are equalised.

Question 24Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A linear demand curve has the equation Qd = 100 − 2P. At a price of 20, the price elasticity of demand (in absolute value) is:

  1. 0.67 Correct answer.
  2. 1.5
  3. 2.0
  4. 0.33

Explanation

At P = 20, Qd = 60, and the slope dQ/dP = −2. Elasticity equals |(dQ/dP)(P/Q)| = 2 × 20/60 ≈ 0.67, which is inelastic.

Question 25Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A per-unit tax is imposed on sellers in a competitive market. The share of the tax borne by consumers is larger when:

  1. demand is less elastic relative to supply Correct answer.
  2. supply is perfectly elastic
  3. the tax is levied on buyers instead
  4. demand is more elastic relative to supply

Explanation

Tax incidence falls more heavily on the side of the market that is less responsive to price. Inelastic demand lets sellers pass more of the tax forward to consumers.

Question 26Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

The law of demand states that, all other things held constant, as the price of a good rises:

  1. the quantity demanded of that good rises
  2. the quantity demanded of that good falls Correct answer.
  3. the quantity supplied of that good falls
  4. the demand curve for that good shifts to the right

Explanation

The law of demand describes an inverse relationship between price and quantity demanded along a given demand curve, with all other determinants held constant. A higher price reduces the quantity buyers are willing and able to purchase.

Question 27Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A market is described by Qd = 120 − 3P and Qs = 20 + 2P. The equilibrium price and quantity are:

  1. P = 28 and Q = 36
  2. P = 10 and Q = 90
  3. P = 20 and Q = 60 Correct answer.
  4. P = 25 and Q = 45

Explanation

Equilibrium occurs where quantity demanded equals quantity supplied, so 120 − 3P = 20 + 2P. Solving gives 100 = 5P, hence P = 20, and substituting back yields Q = 120 − 60 = 60.

Question 28Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A consumer's total utility from successive units of a good is 10, 18, 24 and 28. The marginal utility of the third unit is:

  1. 24
  2. 6 Correct answer.
  3. 4
  4. 8

Explanation

Marginal utility is the change in total utility resulting from consuming one additional unit. Going from two units (18) to three units (24) raises total utility by 6, so the marginal utility of the third unit is 6.

Question 29Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

The supply of a good is described as relatively elastic when:

  1. the good requires highly specialised inputs that are hard to obtain
  2. the good is a necessity with few available substitutes
  3. the time period under consideration is very short
  4. producers can adjust output quickly and cheaply in response to a price change Correct answer.

Explanation

Price elasticity of supply measures how responsive quantity supplied is to a price change, and responsiveness is greater when production can be expanded easily. Flexible production conditions, spare capacity and longer time horizons make supply more elastic.

Question 30Microeconomics: consumer and producer behaviour, demand and supply, market equilibrium, elasticity

A government imposes a per-unit subsidy on producers of a good with a normal downward-sloping demand curve and an upward-sloping supply curve. Compared with the initial equilibrium, the new equilibrium will show:

  1. a higher price paid by consumers and a smaller quantity traded
  2. a higher price paid by consumers and an unchanged quantity
  3. a lower price paid by consumers and a larger quantity traded Correct answer.
  4. a lower price received by producers and an unchanged quantity

Explanation

A per-unit subsidy lowers producers' effective cost, shifting the supply curve to the right. The rightward shift of supply lowers the equilibrium price paid by consumers and raises the equilibrium quantity traded.

Question 31Market structures, competition, price formation and business organisation

In economics, a market is defined primarily as a setting in which buyers and sellers interact in order to do what?

  1. Exchange goods and services and establish a price Correct answer.
  2. Fix wages through collective bargaining
  3. Allocate government subsidies to firms
  4. Collect taxes for public spending

Explanation

A market is the meeting point of supply and demand where exchange occurs and a price emerges. Wage bargaining, taxation and subsidies are policy or institutional activities, not the definition of a market.

Question 32Market structures, competition, price formation and business organisation

Which characteristic best describes a situation of perfect competition?

  1. Firms sell a differentiated product with heavy advertising
  2. Many small sellers offer a homogeneous product and are price takers Correct answer.
  3. Entry into the industry is blocked by legal barriers
  4. A single firm sets the market price

Explanation

Perfect competition requires many small sellers, a homogeneous product, free entry and exit, and perfect information, so no individual firm can influence price. Price setting, product differentiation and blocked entry belong to other structures.

Question 33Market structures, competition, price formation and business organisation

A market dominated by a very small number of large firms that are mutually interdependent in their pricing decisions is called:

  1. Perfect competition
  2. A monopsony
  3. Monopolistic competition
  4. An oligopoly Correct answer.

Explanation

An oligopoly is a market with few large sellers whose decisions depend on each other's expected reactions. Monopsony refers to a single buyer, not a few sellers.

Question 34Market structures, competition, price formation and business organisation

The demand curve facing a firm in a perfectly competitive market is best described as:

  1. Vertical, because quantity is fixed
  2. Horizontal at the prevailing market price Correct answer.
  3. Downward sloping, because the firm must lower price to sell more
  4. Upward sloping, because higher prices attract more buyers

Explanation

A price-taking firm can sell any quantity at the market price, so its own demand curve is perfectly elastic, i.e. horizontal. Only a firm with market power faces a downward-sloping demand curve.

Question 35Market structures, competition, price formation and business organisation

According to the law of demand, other things being equal, a rise in the price of a normal good will generally lead to:

  1. An increase in the quantity demanded
  2. No change in quantity demanded
  3. A shift of the demand curve to the right
  4. A fall in the quantity demanded Correct answer.

Explanation

The law of demand states an inverse relationship between price and quantity demanded, so a price rise reduces quantity demanded along a given curve. A change in price moves along the curve rather than shifting it.

Question 36Market structures, competition, price formation and business organisation

A movement along the supply curve for a good is caused by a change in:

  1. The price of the good itself Correct answer.
  2. The number of producers in the market
  3. The cost of raw materials
  4. Technology used in production

Explanation

A change in the good's own price changes the quantity supplied and is shown as a movement along the supply curve. Changes in costs, technology or the number of producers shift the entire curve.

Question 37Market structures, competition, price formation and business organisation

Market equilibrium is reached at the price at which:

  1. Quantity supplied exceeds quantity demanded
  2. Quantity demanded equals quantity supplied Correct answer.
  3. Quantity demanded exceeds quantity supplied
  4. Total revenue of producers is maximised

Explanation

Equilibrium occurs where the quantity buyers wish to buy equals the quantity sellers wish to sell, so there is no tendency for price to change. Imbalances create shortages or surpluses that push price toward equilibrium.

Question 38Market structures, competition, price formation and business organisation

If a government sets a price ceiling below the equilibrium price, the most likely result is:

  1. A surplus of the good
  2. An increase in quantity supplied
  3. A shortage of the good Correct answer.
  4. An immediate rise in the market price

Explanation

A binding price ceiling prevents the price from rising to equilibrium, so quantity demanded exceeds quantity supplied, creating a shortage. A surplus arises from a price floor above equilibrium.

Question 39Market structures, competition, price formation and business organisation

When demand is price-elastic, a firm that lowers its price will typically experience:

  1. A rise in total revenue Correct answer.
  2. A rise in unit production cost
  3. No change in total revenue
  4. A fall in total revenue

Explanation

Elastic demand means the percentage change in quantity exceeds the percentage change in price, so a price cut raises quantity sold proportionally more and total revenue increases. Inelastic demand would produce the opposite result.

Question 40Market structures, competition, price formation and business organisation

Which of the following is a defining feature of a monopoly?

  1. Mutual interdependence among a few large firms
  2. A single seller with no close substitutes and high barriers to entry Correct answer.
  3. Many sellers offering identical products
  4. Free entry and exit of firms

Explanation

A monopoly exists when one firm supplies a product with no close substitutes and entry is blocked, giving the firm market power. Many sellers and free entry describe competitive structures.

Question 41Market structures, competition, price formation and business organisation

The main source of a monopolist's market power is:

  1. Heavy advertising by competing firms
  2. A horizontal demand curve facing the firm
  3. The absence of close substitutes and barriers preventing entry Correct answer.
  4. Government-fixed prices equal to marginal cost

Explanation

Market power rests on consumers having no close alternative and on barriers that keep rivals out. Without substitutes and entry threats, the monopolist faces a downward-sloping demand curve and can influence price.

Question 42Market structures, competition, price formation and business organisation

Product differentiation in monopolistic competition mainly allows a firm to:

  1. Charge a price slightly above that of close rivals Correct answer.
  2. Avoid any need for advertising
  3. Achieve the lowest possible average cost
  4. Eliminate all competitors from the market

Explanation

By making its product appear distinct, a firm gains limited pricing discretion and can charge a bit more than close substitutes. Differentiation does not remove rivals or guarantee minimum costs.

Question 43Market structures, competition, price formation and business organisation

In a perfectly competitive market, economic profit tends to disappear in the long run because:

  1. Firms collude to keep prices low
  2. Consumer demand falls permanently
  3. The government fixes prices at average cost
  4. Free entry attracts new firms, increasing supply and lowering price Correct answer.

Explanation

Positive economic profit signals attractive returns, drawing new entrants. Entry expands market supply, pushing price down until profit is normal and no further entry is induced.

Question 44Market structures, competition, price formation and business organisation

A firm's fixed costs are best described as costs that:

  1. Exist only when output is zero in the long run
  2. Change directly with the level of output
  3. Equal the wage bill of production workers
  4. Do not vary with output in the short run Correct answer.

Explanation

Fixed costs, such as rent or insurance, are incurred regardless of how much is produced in the short run. Variable costs, such as labour and materials, change with output.

Question 45Market structures, competition, price formation and business organisation

A firm maximises its profit at the output level where:

  1. Price equals average fixed cost
  2. Total revenue is at its maximum
  3. Marginal revenue equals marginal cost Correct answer.
  4. Average total cost is at its minimum

Explanation

Profit rises as long as each extra unit adds more revenue than cost, and falls once marginal cost exceeds marginal revenue. The profit-maximising point is therefore where marginal revenue equals marginal cost.

Question 46Market structures, competition, price formation and business organisation

A key advantage of organising production as a joint-stock company rather than a sole proprietorship is:

  1. Freedom from any management structure
  2. Complete absence of taxation
  3. Unlimited personal liability of the owners
  4. Limited liability and easier access to capital Correct answer.

Explanation

Shareholders of a joint-stock company enjoy limited liability and the firm can raise capital by issuing shares. Sole proprietors, by contrast, bear unlimited liability and rely largely on personal funds.

Question 47Market structures, competition, price formation and business organisation

Which of the following is an example of a horizontal merger?

  1. A firm opening a new branch abroad
  2. A car maker buying a tyre supplier
  3. Two competing banks combining into one Correct answer.
  4. A retailer buying a logistics company

Explanation

A horizontal merger joins firms at the same stage of production in the same industry, such as two rival banks. Vertical mergers link firms at different stages of the supply chain.

Question 48Market structures, competition, price formation and business organisation

A merger between two large competitors may concern competition authorities mainly because it can:

  1. Increase the number of firms in the market
  2. Improve product quality through research
  3. Lower the combined firm's production costs
  4. Reduce the number of rivals and increase market power Correct answer.

Explanation

Horizontal mergers reduce the number of independent sellers, potentially raising prices and weakening competition. Efficiency gains are possible but are weighed against the risk of increased market power.

Question 49Market structures, competition, price formation and business organisation

Which factor is most likely to shift the market supply curve for bread to the right?

  1. A fall in the wages of bakery workers Correct answer.
  2. A rise in the price of flour
  3. A rise in the price of bread
  4. An increase in consumer income

Explanation

Lower wages reduce production costs, so bakeries are willing to supply more at every price, shifting supply right. Higher input costs shift supply left, and a change in the good's own price moves along the curve.

Question 50Market structures, competition, price formation and business organisation

A firm sells 100 units at a price of 10 and finds that a price cut to 9 raises sales to 130 units. Using the total revenue test, demand over this range is:

  1. Unit elastic, because price changed
  2. Elastic, because revenue rose Correct answer.
  3. Perfectly inelastic, because quantity changed
  4. Inelastic, because revenue fell

Explanation

Revenue rises from 1000 to 1170 after the price cut, so the percentage increase in quantity exceeds the percentage fall in price, indicating elastic demand. If demand were inelastic, revenue would have fallen.