Economics study desk with supply and demand curves, scales and an economic city model

Focused topic practice

introduction to economics MCQs

Practise focused introduction to economics questions with marked answers for exam preparation and subject revision.

introduction to economics Mcqs
1. Resources in an economy ?
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A. Are limited at any moment in time

B. Are always found

C. Can never decease

D. Always increase over time

2. If marginal benefit is greater than marginal cost, a rational choice involves ?
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A. more of the activity

B. no more of the activity.

C. less of the activity

D. more or less, depending on the benefits of other activities

3. The sacrifice involved when you choose a particular course of action is called the ?
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A. Alternative

B. Consumer cost

C. Producer cost

D. Opportunity cost
4. The opportunity cost of a good is______________?
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A. the loss of interest in using savings

B. the time lost in finding it

C. the expenditure on the good

D. the quantity of other goods sacrificed to get another unit of that good
5. Economics is the study of ?
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A. how society manages its unlimited resource

B. how to reduce our wants until we are satisfied.

C. how to avoid having to make trade-offs

D. how to fully satisfy our unlimited wants

6. In a command (planned) economy ?
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A. The public sector is large

B. Individual firms make decisions for themselves about what to produce and how to produce it

C. The price mechanism acts as an incentive

D. Resources are allocated by market forces
7. Unemployment means that ?
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A. at the going wage rate, there are people who want to work but cannot find work.

B. there are some people who will not work at the going wage rate.

C. people are not willing to work at the going wage rate.

D. there is excess demand in the labour market

8. A student chooses to study because the marginal benefit is greater than the ______________ cost?
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A. total

B. marginal

C. expected

D. average

9. In a free market?
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A. government intervenes

B. government interferes

C. Prices adjust to reconcile scarcity and desires

D. government plan production

10. If the diagram of a line shows that lower values on the vertical scale are associated with higher values on the horizontal scale this is an example of ?
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A. a negative linear relationship

B. a nonlinear relationship

C. a scatter diagrams

D. a positive linear relationship

11. The circular flow of goods and incomes shows the relationship between?
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A. Wages and salaries.

B. income and money

C. goods and services.

D. ms and households

12. If a price increase of good A increases the quantity demanded of good B, then good B is a________________?
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A. inferior good

B. substitute good

C. complementary good

D. bargain

13. Suppose you find Rs 20. If you choose to use the Rs 20 to go to a football match your opportunity cost of going to the game is ?
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A. nothing because you found the money.

B. Rs20 (because you could have used the Rs20 to buy other ghings)

C. Rs 20 (because you could have used the Rs 20 to buy other things) plus the value of your time spent at the game plus the cost of the dinner you purchased at the game.

D. Rs20 (because you found the money Rs 20 to buy other things) plus the value of your time spent at the game.

E. None of these

14. Opportunity cost is_________________?
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A. the additional benefit of buying an additional unit of a product

B. a cost that cannot be avoided. regardless of what is done in the future

C. that which we forgo, or give up, when we make a choice or a decision.

D. the cost incurred in the past before we make a decision about what to do in the future.

15. Workers in Western Europe enjoy a high standard of living because ?
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A. Unions in Western Europe keep the wage high

B. the countries of Western Europe have set high minimum wage rates.

C. none of these answers.

D. The countries of Western Europe have protected their industries from foreign corporation

E. Workers in the united states are highly productive

16. An increase in the price of beef providers information which ?
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A. provides no information because prices in a market system are managed by planning boards.

B. tells producers to produce more beef.

C. tells consumers to buy less pork

D. tells consumers to buy more beef.

17. You are planning to run a hot dog stand during a forthcoming fair. You originally estimated that you will generated sales revenue of Rs 2000 and you have already spent Rs 1000 building the hot dog stand. The hot dog stand is nearly completed but now you estimate total sales to be only Rs 800 because the fair clashes with a major music festival in a nearby location. You can complete the hot dog stand for another Rs 300 Your decision rule should be to complete the hot dog stand as long as the cost to complete the stand is less than ?
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A. Rs 800

B. Rs 500

C. Rs 1000

D. Rs 300

18. Normative economics Forms ________ based on ________?
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A. positive statements values

B. positive statements, facts

C. opinions personal facts

D. opinions facts

19. On a graph, a positive linear relationship___________________?
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A. moves up to the left

B. moves up to the right

C. moves down to the right

D. moves down to the left

20. Which of the following is not part of the opportunity cost of going on holiday ?
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A. The money you could have made if you had stayed at home and worked

B. The money you spent on a theater show

C. the money you spent on food

D. The money you spend on airline tickets

21. The free market involves ?
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A. All trade via barter

B. Market forces of supply and demand

C. The Subsidizing of products by the government

D. The free provision of products

22. The basic economic problems will not be solved by ?
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A. Government intervention

B. The creation of unlimited resources

C. Market forces

D. A mixture of government intervention and the free market

23. The concept of opportunity cost ?
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A. Would be relevant if we eliminated poverty

B. is relevant only for a capitalist economy like the United States.

C. Suggests a major increase in public health care spending means an expansion in other areas will be harder to achieve.

D. Suggests all our wants can be achieved.

24. A supply curve is directly affected by ?
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A. technology

B. government regulation

C. input costs

D. all of the above
25. An increase in consumer income will increase demand for a _________ but decrease demand for a?
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A. substitute good, inferior good

B. inferior good normal good

C. normal good inferior good

D. normal good, complementary good

26. The Phillips curve shows that ?
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A. none of these

B. inflation and unemployment are unrelated in the short run.

C. a decrease in inflation temporarily increases unemployment.

D. an increase in inflation temporarily increases unemployment.

E. the business cycle has been eliminated

27. Microeconomics is not concerned with the behavior of ?
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A. Consumers

B. firms

C. aggregate demand

D. industries.

28. High and persistent inflation is caused by ?
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A. OPEC raising the price of oil too much

B. regulations raising the cost of production too much

C. governments increasing the quantity of money too much

D. unions increasing wages too much
29. The equilibrium price clears the market it is the price at which _________________?
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A. Buyers spend all their money

B. Everything is sold

C. Excess demanded equals quantity

D. C and D

E. Quantity demanded equal quality supplied

30. Which one of the following is a normative statement ?
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A. Inequality in the distribution of income is a more serious problem than unemployment

B. Inflation is rising

C. The richest 10 per cent of the population has had a bigger percentage increase in incomes over the past 10 years than the poorest 10 percent

D. The proportion of peoples income paid in taxes is higher under this government than under the previous one.

31. The retail price index is used to__________________?
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A. compare shop prices

B. None of the above

C. construct price lists

D. measure changes in the cost of living
32. When we know the quantity of a product that buyers wish to purchase at each possible price we know_____________?
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A. Excess supply

B. Supply

C. Demand

D. Excess demand

33. Data are important in economics because _________ and ____________?
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A. they can be used in computers governments use them

B. they provide interesting information can be summarized

C. they suggest relationships for explanation, allow testing of hypotheses

D. they can be used for tables, they can be graphed

34. In the mixed economy________________?
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A. economics s is solved by government departments

B. economics problems are solved by the government and market

C. economic decisions are made by the private sector and free market

D. economic allocation is achieved by the invisible hand

35. The economics the central problem is ?
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A. Scarcity

B. Consumption

C. Money

D. Allocation

36. Economics is the study of ?
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A. Consumption decisions

B. the best way to run society

C. how society decides what how and for whom to produce

D. Production technology

37. Productivity can be increased by ?
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A. improving the education of workers

B. restricting trade with foreign countries.

C. raising minimum wages.

D. raising union wages.

38. Macroeconomics is the study of ?
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A. the economy as a whole

B. household purchase decisions

C. the relationship between different sectors on the economy

D. individual building blocks in the economy

39. -7-+47-+45-+-+Since people respond to incentives, we would expect that if the average salary of accountants increases by 50% while the average salary of teachers increase by 20% then ?
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A. Fewer students will take degree courses in education and more will take accounting courses.

B. fewer students will attend university

C. None of these

D. fewer students will take degree courses in education and more will take accounting courses
40. In a planned or command economy, all the economics decisions are taken by the ?
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A. voters

B. Consumers

C. government

D. Workers

41. A demand curve can shift because changing ?
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A. tastes

B. all of the above

C. prices of related goods

D. incomes

42. Time series data show information ?
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A. about different points in time over the same variable

B. about different points in time over different places

C. about different variables over different places

D. about the same point in time over different places

43. Inflation is___________________?
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A. an increase in the overall price level.

B. an increase in the overall level of economic activity.

C. a decrease in the overall level of economics activity

D. a decrease in the overall price level.

44. Foreign trade ?
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A. makes a country more equitable.

B. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything to home.

C. increase the scarcity of resources.

D. None of these

45. In a free market system, the amount of goods and services that any one household gets depends upon its ?
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A. wage and interest income

B. income

C. wealth

D. income and wealth
46. Macroeconomics deals with?
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A. economics aggregates

B. the behavior of the electronics industry

C. the behavior of firms

D. the activities of individual units

47. Raising taxes and increasing welfare payments ?
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A. improves equity at the expense of efficiency.

B. reduces market power

C. improves efficiency at the expense of equity.

D. Proves that there is such a thing as a free lunch

48. A straight-line diagram can be drawn knowing the ________ and ________?
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A. intercept and slope

B. scale and slope

C. intercept and scale

D. vertical axis and horizontal axis

49. A graph showing all the combinations of goods and services that can be produced if all of societys resources are used efficiently is a ?
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A. Circular-flow diagram.

B. Lorenz curve.

C. Production possibility curve.

D. capital consumption frontier.

50. Which of the following statements is true about a market economy ?
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A. Market participants act as if guided by an invisible hand to produce outcomes that maximize social welfare

B. With a large enough computer, central planners could guide production more efficiently than markets.

C. Taxes help prices communicate costs and benefits to producers and consumers.

D. The strength of a market system is that it tends to distribute resources evenly across consumers.