Q1: Economics is the study of ___
A. Inflation and unemployment
B. How society allocates scarce resources
C. How to make money
D. Market systems only
Answer: B
Q2: The basic economic problem is ___
A. Scarcity
B. Abundance
C. Choice
D. Production
Answer: A
Q3: The opportunity cost of a good is ___
A. The cost of labor used
B. The next best alternative forgone
C. The cost of producing it
D. The amount paid for it
Answer: B
Q4: The factors of production include ___
A. Land, labor, capital, and entrepreneurs
B. Wages, rent, interest, and profit
C. Money and machines only
D. Government and businesses
Answer: A
Q5: The law of demand states that ___
A. Demand increases as price increases
B. Quantity demanded falls as price rises
C. Price and demand are unrelated
D. Demand is always constant
Answer: B
Q6: A shift in the demand curve may be caused by ___
A. A change in price
B. A change in income
C. A change in quantity
D. A change in supply
Answer: B
Q7: An increase in the price of substitutes will ___
A. Shift the demand curve left
B. Shift the supply curve right
C. Increase demand
D. Decrease demand
Answer: C
Q8: The point where the demand and supply curves intersect is ___
A. Shortage
B. Surplus
C. Disequilibrium
D. Equilibrium
Answer: D
Q9: Price elasticity of demand measures ___
A. Change in supply
B. Response of quantity demanded to price change
C. Profit maximization
D. Total revenue
Answer: B
Q10: A product with inelastic demand has a PED ___
A. Greater than 1
B. Equal to 1
C. Less than 1
D. Zero
Answer: C
Q11: If a product is a necessity, its demand is likely to be ___
A. Perfectly elastic
B. Elastic
C. Inelastic
D. Unitary elastic
Answer: C
Q12: Cross elasticity of demand relates to ___
A. Price and output
B. Income and quantity
C. Two related goods
D. Price and cost
Answer: C
Q13: Utility refers to ___
A. Cost
B. Income
C. Satisfaction
D. Revenue
Answer: C
Q14: Marginal utility is ___
A. The utility from all units consumed
B. The satisfaction from one more unit
C. Always increasing
D. Equal to price
Answer: B
Q15: The law of diminishing marginal utility implies that ___
A. Utility increases forever
B. More consumption leads to higher marginal satisfaction
C. Each additional unit gives less satisfaction
D. Consumers stop buying after the first unit
Answer: C
Q16: Consumer equilibrium occurs where ___
A. MRS = MU
B. Budget = Income
C. MRS = Price ratio
D. Budget line touches X-axis
Answer: C
Q17: In the short run, ___
A. All factors are variable
B. At least one factor is fixed
C. There are no costs
D. All costs are fixed
Answer: B
Q18: Fixed costs are ___
A. Costs that change with output
B. Always zero
C. Costs that do not vary with output
D. Total variable costs
Answer: C
Q19: Marginal cost is ___
A. Total cost divided by output
B. Cost of producing one more unit
C. Always decreasing
D. Constant in all cases
Answer: B
Q20: The law of diminishing returns operates in the ___
A. Short run
B. Long run
C. Product market
D. Factor market
Answer: A
Q21: A perfectly competitive firm is a ___
A. Price taker
B. Price maker
C. Monopoly
D. Monopolist
Answer: A
Q22: In monopoly, the firm has ___
A. Many competitors
B. No control over price
C. One seller and high barriers
D. Free entry
Answer: C
Q23: Product differentiation is a feature of ___
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
Answer: C
Q24: The kinked demand curve is associated with ___
A. Monopoly
B. Oligopoly
C. Perfect competition
D. Monopsony
Answer: B
Q25: Total Revenue = ___
A. Price - Cost
B. Price × Quantity
C. Marginal Cost × Quantity
D. Fixed Cost + Variable Cost
Answer: B
Q26: A firm maximizes profit where ___
A. TR = TC
B. AR = AC
C. MR = MC
D. MR = AC
Answer: C
Q27: If MR > MC, the firm should ___
A. Decrease output
B. Shut down
C. Increase output
D. Stay constant
Answer: C
Q28: Wages are the reward for ___
A. Capital
B. Land
C. Labour
D. Entrepreneurs
Answer: C
Q29: Rent is the reward for ___
A. Labour
B. Capital
C. Land
D. Risk
Answer: C
Q30: The marginal productivity theory explains ___
A. Law of demand
B. Profit maximization
C. Factor pricing
D. Cost minimization
Answer: C
Q31: Market failure means ___
A. Perfect competition fails
B. Market allocates resources inefficiently
C. Government controls all prices
D. Monopoly takes over
Answer: B
Q32: An example of a public good is ___
A. Bread
B. National defense
C. iPhones
D. Cars
Answer: B
Q33: Negative externalities occur when ___
A. Social cost < Private cost
B. Social cost > Private cost
C. Social benefit > Private benefit
D. Only the consumer benefits
Answer: B
Q34: Government can correct market failure by ___
A. Ignoring it
B. Taxing and subsidizing
C. Printing more money
D. Increasing profits
Answer: B
