CFA 2026 Level II Vignettes Economic Analysis Market Economics Free Quiz 3

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CFA 2026 Level II Vignettes Economic Analysis Market Economics Free Quiz 3

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CFA 2026 Level II Vignettes Economic Analysis Market Economics Free Quiz 3

Practice CFA 2026 Level II Vignettes Economic Analysis MCQs from Market Economics. Get instant results with Explanation.

General10 MCQs

1. Vignette 5: Public Goods and Externalities - What is the effect of a negative externality on production?

A. UnderproductionB. Efficient productionC. No effectD. Overproduction

2. What is a Pigouvian tax?

A. A tax equal to the external costB. A tax on all goodsC. A subsidy to reduce productionD. A quota on production

3. What is the effect of a positive externality on production?

A. OverproductionB. UnderproductionC. Efficient productionD. No effect

4. What is the Coase theorem?

A. Government intervention is always neededB. Private bargaining never worksC. Private bargaining can resolve externalities with low transaction costsD. Property rights are irrelevant

5. What is the tragedy of the commons?

A. When a resource is underusedB. When a resource is efficiently usedC. When a resource is managed collectivelyD. When a shared resource is overused and depleted

General10 MCQs

6. Vignette 6: Information Asymmetry - What is adverse selection?

A. Occurs before a transaction due to information asymmetryB. Occurs after a transaction due to hidden actionsC. Occurs when both parties have the same informationD. Occurs when information is perfect

7. What is moral hazard?

A. Occurs before a transactionB. Occurs after a transaction due to hidden actionsC. Occurs when both parties are fully informedD. Occurs when no transaction is made

8. What is signaling in the context of information asymmetry?

A. A way to create information asymmetryB. A way to hide informationC. A way to convey information credibly to reduce asymmetryD. A way to avoid transactions

9. What is screening?

A. A strategy by the informed party to convey informationB. A strategy to hide informationC. A strategy to reduce moral hazardD. A strategy by the uninformed party to gather information

10. What is the lemons problem?

A. A market for high-quality goodsB. A market dominated by low-quality goods due to information asymmetryC. A market with perfect informationD. A market with no sellers

📋 CFA - Test Online Practice Quizzes

CFA

Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Alternative Investments: 8 MCQs
Corporate Issuers: 7 MCQs
Derivatives: 5 MCQs
Economics: 7 MCQs
Equity Investments: 12 MCQs
Ethics: 16 MCQs
Financial Statement Analysis: 11 MCQs
Fixed Income: 11 MCQs
Portfolio Management: 9 MCQs
Quant Methods: 6 MCQs

Merit Formula: -

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