Basic economics mcqs

Economics mcqs 1

Quiz

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1. 1. The fundamental economic problem faced by all societies is?
   1.   Unemployment
   2.   Inequality
   3.   Poverty
   4.   Scarcity
2. “Capitalism” refers to?
   1.   The use of markets
   2.   Government ownership of capital goods
   3.   Private ownership of capital goods
   4.   Private ownership of homes & cars
3. The law of demand states that?
   1.   As the quantity demanded rises, the price rises
   2.   As the price rises, the quantity demanded rises
   3.   As the price rises, the quantity demanded falls
   4.   As supply rises, the demand rises
4. The demand for a product would be more inelastic:
   1.   The greater is the time under consideration
   2.   The greater is the number of substitutes available to buyers
   3.   The less expensive is the product in relation to incomes
   4.   All of the above
5. The bowed shape of the production possibilities curve illustrates?
   1.   The law of increasing marginal cost
   2.   That production is inefficient
   3.   That production is unattainable
   4.   The demand is relatively inelastic
6. The process by which resources are transformed into useful forms is
   1.   Capitalisation.
   2.   Consumption.
   3.   Allocation.
   4.   Production.
7. Which of the following is not a resource as the term is used by economists?
   1.   Money
   2.   Land
   3.   Building
   4.   labour
8. A graph showing all the combinations of goods and services that can be produced if all of society's resources are used efficiently is a
   1.   Demand curve
   2.   Supply curve
   3.   Production possibility frontier
   4.   Circular flow diagram
9. The phrase "cetris paribus" is best expressed as
   1.   All else equal
   2.   Everything affects everything alse
   3.   Scarcity is a fact of life
   4.   There is no such thing as a free lunch
10. Positive statement in economics are
    1.   Value judgements
    2.   Verifiable or testable
    3.   Statements in the affirmative
    4.   Goods statements
11. The law of "demand implies" that
    1.   As price fall, quantity demanded increases
    2.   As prices fall, demand increases
    3.   As prices rise, quantity demanded increases
    4.   As prices rise, demand decreases
12. Equilibrium in the market for good A obtains
    1.   When there is no surplus or shortage prevailing in the market
    2.   Where the demand and supply curves for A intersect
    3.   When all of what is produced of A is consumed
    4.   All of the above
13. A price floor is
    1.   A maximum price usually set by government, that sellers may charge for a good or
       service.
    2.   A minimum price usually set by government, that sellers must charge for a good
       or service.
    3.   The difference between the initial equilibrium price and the equilibrium price after a
       decrease in supply
    4.   The minimum price that consumers are willing to pay for a good or service.
14. When the decrease in the price of one good causes the demand for another good to decrease, the goods are
    1.   Complements
    2.   Normal
    3.   Inferior
    4.   Substitutes
15. The price elasticity of demand is the
    1.   Ratio of the percentage change in quantity demanded to the percentage change in
       price
    2.   Ratio of the change in price to the change in quantity demanded
    3.   Ratio of the change in quantity demanded to the change in price
    4.   Ratio of the percentage change in price to the percentage change in quantity
       demanded.
16. Income elasticity of demand is the % change in quantity demanded divided by the % change in income. Which type of goods have negative income elasticity of demand?
    1.   Inferior goods.
    2.   Normal goods.
    3.   Substitute goods.
    4.   Complementary goods
17. If total revenue rises by 10% when price increases by 5%, this means:
    1.   Demand is price inelastic
    2.   Demand is price elastic
    3.   Demand is unit elastic
    4.   Demand is perfectly inelastic
18. When firms advertise their product, they are trying to:
    1.   Shift the demand curve to the right
    2.   Make the demand curve steeper
    3.   Make demand for the product more inelastic
    4.   All of the above
19. Economists use the term utility to mean
    1.   The value of a product before it has been advertised.
    2.   The satisfaction a consumer obtains from a good or service.
    3.   Any characteristic of a good or service which cannot be measured
    4.   The contribution a good or service makes to social welfare.
20. The law of diminishing marginal utility states that
    1.   Total satisfaction will decrease as more units of the good are consumed.
    2.   The satisfaction derived from each additional unit of a good consumed will decrease.
    3.   Total utility will become negative
    4.   Both the A and C option
21. Economists have used the idea of diminishing marginal utility to explain why
    1.   "Demand curves slope downwards
    2.   Demand curves become flatter at lower prices.
    3.   Demand curves are inelastic.
    4.   Both the A and B option.
22. A consumer will buy more units of a good if the value of the good's
    1.   Total utility is greater than price.
    2.   Marginal utility is less than price
    3.   Marginal utility is greater than price
    4.   Total utility is less than price
23. The limits imposed on household choices by income, wealth, and product prices are captured by the
    1.   Budget constraint
    2.   Choice set
    3.   Assumption of perfect knowledge.
    4.   Preference set
24. If a household's money income is doubled
    1.   The budget constraint will shift in and parallel to the old one
    2.   The budget constraint is not affected
    3.   The budget constraint will swivel outward at the Y-intercept
    4.   The budget constraint will shift out parallel to the old one
25. Indifference curves cannot
    1.   Be L shaped
    2.   Be straight lines
    3.   Intersect
    4.   All of the above
26. “Moral hazard” and “adverse selection” are problems related to asymmetric information, that arise
    
    1.   In ex-ante and ex-post contexts, respectively
    2.   In ex-post and ex-ante contexts, respectively
    3.   In ex-ante contexts
    4.   In ex-post contexts
27. Profit-maximising firms want to maximize the difference between
    1.   Total revenue and total cost.
    2.   Marginal revenue and marginal cost
    3.   Marginal revenue and average cost.
    4.   Total revenue and marginal cost.
28. A graph showing all the combinations of capital and labour available for a given total cost is the
    1.   Budget constraint
    2.   Isoquant
    3.   Expenditure set
    4.   Isocost line
29. Market power is
    1.   A firm's ability to charge any price it likes
    2.   A firm's ability to raise price without losing all demand for its product.
    3.   A firm's ability to sell any amount of output it desires at the market-determined price.
    4.   A firm's ability to monopolise a market completely.
30. Economic profits are
    1.   The difference between total revenue and total costs
    2.   Anything greater than the normal opportunity cost of investing
    3.   A rate of profit that is just sufficient to keep owners and investors satisfied.
    4.   The opportunity costs of all inputs