1. Economics is the study of:
Answer: a) The allocation of scarce resources to fulfill unlimited wants and needs.
2. Which of the following is NOT considered a scarce resource in economics?
Answer: d) Air
3. The fundamental problem of economics is:
Answer: b) How to allocate unlimited resources to satisfy unlimited wants.
4. Opportunity cost is best defined as:
Answer: c) The highest-valued alternative forgone when a decision is made.
5. Which of the following is a microeconomic question?
Answer: c) How do consumers’ preferences affect the demand for a specific product?
6. Macroeconomics primarily focuses on:
Answer: c) The overall performance of the economy.
7. In economics, “ceteris paribus” means:
Answer: a) “All things considered.”
8. Which of the following statements best represents the concept of “utility” in economics?
Answer: c) Utility refers to the satisfaction or happiness derived from consuming goods and services.
9. “Guns or butter” is a classic economic example used to illustrate the concept of:
Answer: b) Opportunity cost
10. Which of the following is NOT a factor of production in economics?
Answer: c) Money
11. The study of how individuals and societies make choices about the production, consumption, and distribution of goods and services is known as:
Answer: c) Economics
12. Which of the following best describes the law of demand?
Answer: d) As the price of a good decreases, the quantity demanded increases.
13. The measure of responsiveness of quantity demanded to a change in price is known as:
Answer: a) Elasticity of demand
14. When price and quantity demanded have a direct relationship, the demand curve is:
Answer: a) Upward-sloping
15. A government-imposed maximum price that is below the equilibrium price is called:
Answer: b) Price ceiling
16. The total revenue of a firm is calculated as:
Answer: a) Price multiplied by quantity sold
17. In the short run, a firm in a perfectly competitive market will shut down if price falls below:
Answer: a) Average variable cost
18. The Consumer Price Index (CPI) measures changes in the prices of a basket of goods and services purchased by:
Answer: c) Consumers
19. Fiscal policy refers to the use of government spending and taxation to:
Answer: b) Stabilize the economy
20. The natural rate of unemployment is:
Answer: a) The unemployment rate that exists when the economy is operating at full employment.
21. When the actual inflation rate is lower than expected inflation, who benefits the most?
Answer: a) Borrowers
22. The Phillips curve shows the relationship between:
Answer: a) Inflation and unemployment
23. The central bank’s primary tool for conducting monetary policy is:
Answer: b) Open market operations
24. The Lorenz curve is used to illustrate:
Answer: b) The income distribution in an economy.
25. The term “comparative advantage” is used to describe a situation in which a country can produce a good at a lower:
Answer: a) Opportunity cost than other countries.
26. Which of the following is NOT a function of money in an economy?
Answer: c) Unit of production
27. The concept of “time value of money” suggests that:
Answer: c) Money invested today will always be worth more than the same amount received in the future.
28. Which of the following statements about economic systems is correct?
Answer: d) In a traditional economy, resources are allocated based on customs and traditions.
29. Gross Domestic Product (GDP) is a measure of:
Answer: b) The total value of all goods and services produced within a country’s borders in a given period.
30. Which of the following is NOT a component of GDP?
Answer: d) Trade balance
31. The circular flow model of the economy shows:
Answer: d) All of the above.
32. In the circular flow model, the market where businesses sell goods and services to households is known as the:
Answer: a) Product market
33. In the circular flow model, the market where households sell their labor and other factors of production to businesses is known as the:
Answer: b) Factor market
34. Economic growth is measured by the:
Answer: c) Increase in the level of real GDP over time.
35. Economic indicators, such as GDP, unemployment rate, and inflation rate, are used to:
Answer: b) Evaluate government policies and economic performance.
36. The natural rate of unemployment is the level of unemployment that occurs when:
Answer: b) The economy is at full employment and operating at its potential output.
37. The unemployment rate is calculated as the number of unemployed individuals:
Answer: b) Divided by the number of people in the labor force.
38. Structural unemployment occurs when:
Answer: c) There is a mismatch between the skills of job seekers and the skills demanded by employers.
39. The Phillips curve illustrates the inverse relationship between:
Answer: a) Inflation and unemployment.
40. Stagflation refers to a situation where an economy experiences:
Answer: a) High inflation and high unemployment simultaneously.
41. The Federal Reserve uses monetary policy to:
Answer: b) Regulate the money supply and influence interest rates to stabilize the economy.
42. Market equilibrium occurs when:
Answer: c) The quantity demanded equals the quantity supplied.
43. A price ceiling is a government-imposed maximum price set:
Answer: b) Below the equilibrium price.
44. If the price of a good is above the equilibrium price, there will be a:
Answer: c) Shortage, and the price will increase.
45. The main goal of a firm operating in a market economy is to:
Answer: c) Maximize profit.
46. Which of the following market structures is characterized by a single seller and significant barriers to entry?
Answer: d) Monopoly
47. Monopolistic competition is characterized by:
Answer: c) Many sellers offering differentiated products.
48. In a perfectly competitive market, firms are:
Answer: b) Price takers
49. The Laffer curve illustrates the relationship between tax rates and:
Answer: c) Tax revenue
50. Game theory is a branch of economics that studies:
Answer: c) The strategic interactions between decision-makers in various situations.
51. In a simultaneous-move game, players make decisions:
Answer: b) At the same time without knowing the others’ choices.
52. A dominant strategy in game theory refers to a strategy that:
Answer: a) Yields the highest possible payoff for a player, regardless of the other player’s choice.
53. The Nash equilibrium in a game occurs when:
Answer: c) Each player chooses the best strategy given the other player’s choice.
54. The Coase theorem suggests that, in the presence of externalities, private parties can reach an efficient outcome through:
Answer: b) The market system without any government intervention.
55. Public goods are characterized by:
Answer: d) Nonrivalry in consumption and nonexcludability.
56. The “free-rider” problem occurs with public goods because:
Answer: b) People can enjoy the benefits of the good without paying for it.
57. The tragedy of the commons is a situation in which:
Answer: c) Common resources are overused and depleted due to lack of ownership and control.
58. A positive externality occurs when:
Answer: b) An activity generates benefits that are not reflected in the market price.
59. The concept of “comparative advantage” is used to describe a situation in which a country can produce a good at a lower:
Answer: a) Opportunity cost than other countries.
60. Which of the following is NOT a function of money in an economy?
Answer: c) Unit of production
61. The concept of “time value of money” suggests that:
Answer: c) Money invested today will always be worth more than the same amount received in the future.
62. Which of the following statements about economic systems is correct?
Answer: d) In a traditional economy, resources are allocated based on customs and traditions.
63. Gross Domestic Product (GDP) is a measure of:
Answer: b) The total value of all goods and services produced within a country’s borders in a given period.
64. Which of the following is NOT a component of GDP?
Answer: d) Trade balance
65. The circular flow model of the economy shows:
Answer: d) All of the above.
66. In the circular flow model, the market where businesses sell goods and services to households is known as the:
Answer: a) Product market
67. In the circular flow model, the market where households sell their labor and other factors of production to businesses is known as the:
Answer: b) Factor market
68. Economic growth is measured by the:
Answer: c) Increase in the level of real GDP over time.
69. Economic indicators, such as GDP, unemployment rate, and inflation rate, are used to:
Answer: b) Evaluate government policies and economic performance.
70. The natural rate of unemployment is the level of unemployment that occurs when:
Answer: b) The economy is at full employment and operating at its potential output.
71. The unemployment rate is calculated as the number of unemployed individuals:
Answer: b) Divided by the number of people in the labor force.
72. Structural unemployment occurs when:
Answer: c) There is a mismatch between the skills of job seekers and the skills demanded by employers.
73. The Phillips curve illustrates the inverse relationship between:
Answer: a) Inflation and unemployment.
74. Stagflation refers to a situation where an economy experiences:
Answer: a) High inflation and high unemployment simultaneously.
75. The Federal Reserve uses monetary policy to:
Answer: b) Regulate the money supply and influence interest rates to stabilize the economy.
76. Market equilibrium occurs when:
Answer: c) The quantity demanded equals the quantity supplied.
77. A price ceiling is a government-imposed maximum price set:
Answer: b) Below the equilibrium price.
78. If the price of a good is above the equilibrium price, there will be a:
Answer: c) Shortage, and the price will increase.
79. The main goal of a firm operating in a market economy is to:
Answer: c) Maximize profit.
80. Which of the following market structures is characterized by a single seller and significant barriers to entry?
Answer: d) Monopoly
81. Monopolistic competition is characterized by:
Answer: c) Many sellers offering differentiated products.
82. In a perfectly competitive market, firms are:
Answer: b) Price takers
83. The Laffer curve illustrates the relationship between tax rates and:
Answer: c) Tax revenue
84. Game theory is a branch of economics that studies:
Answer: c) The strategic interactions between decision-makers in various situations.
85. In a simultaneous-move game, players make decisions:
Answer: b) At the same time without knowing the others’ choices.
86. A dominant strategy in game theory refers to a strategy that:
Answer: a) Yields the highest possible payoff for a player, regardless of the other player’s choice.
87. The Nash equilibrium in a game occurs when:
Answer: c) Each player chooses the best strategy given the other player’s choice.
88. The Coase theorem suggests that, in the presence of externalities, private parties can reach an efficient outcome through:
Answer: b) The market system without any government intervention.
89. Public goods are characterized by:
Answer: d) Nonrivalry in consumption and nonexcludability.
90. The “free-rider” problem occurs with public goods because:
Answer: b) People can enjoy the benefits of the good without paying for it.
91. The tragedy of the commons is a situation in which:
Answer: c) Common resources are overused and depleted due to lack of ownership and control.
92. A positive externality occurs when:
Answer: b) An activity generates benefits that are not reflected in the market price.
93. The concept of “comparative advantage” is used to describe a situation in which a country can produce a good at a lower:
Answer: a) Opportunity cost than other countries.
94. Which of the following is NOT a function of money in an economy?
Answer: c) Unit of production
95. The concept of “time value of money” suggests that:
Answer: c) Money invested today will always be worth more than the same amount received in the future.
96. Which of the following statements about economic systems is correct?
Answer: d) In a traditional economy, resources are allocated based on customs and traditions.
97. Gross Domestic Product (GDP) is a measure of:
Answer: b) The total value of all goods and services produced within a country’s borders in a given period.
98. Which of the following is NOT a component of GDP?
Answer: d) Trade balance
99. The circular flow model of the economy shows:
Answer: d) All of the above.
100. In the circular flow model, the market where businesses sell goods and services to households is known as the:
Answer: a) Product market
