1. All economic systems must decide what to produce because
A. resources are not available.
B. consumers want maximum satisfaction.
C. resources are limited in supply.
D. producers want maximum profit.
Answer: C
2. In any economic system, which of the following is not an economic problem?
A. What goods and services to produce.
B. For whom to produce goods or services.
C. What techniques of production to be adopted.
D. Equal distribution of the goods and services.
Answer: D
3. Which of the following problems arises where there are more than one technically possible methods of production?
A. Where to produce.
B. For whom to produce.
C. How to produce.
D. What to produce.
Answer: C
4. The Production Possibility Curve (PPC) indicates that as more of one good is produced
A. less of the other good is produced.
B. the same quantity of the other good is produced.
C. more of the other good is produced.
D. none of the other good is produced.
Answer: A
5. Which of the following best explains what to produce
A. How much goods are to be produced.
B. The combination of resources to be used.
C. Which goods and services to be produced.
D. How many wants are to be satisfied.
Answer: C
6. Points outside a production possibility curve indicate
A. unattainable production levels.
B. attainable production levels.
C. inefficient, but attainable production levels.
D. optimum production levels.
Answer: A
7. The basic problem that Economics attempts to solve is the
A. ranking of goods and services.
B. pricing of goods and services.
C. scarcity of resources.
D. foregoing of alternatives.
Answer: C
8. A basic economic problem of any society is
A. high level of illiteracy.
B. irregular power supply.
C. population growth.
D. resource allocation.
Answer: D
9. Which of the following is related to resource allocation in an economy?
A. How to produce.
B. What to produce.
C. For whom to produce.
D. Efficient use of inputs.
Answer: D
10. Most of the problems of economies arise as a result of
A. competing demands for scarce resources.
B. increase in the demand for more goods and services.
C. the desire of producers to supply more goods and services.
D. the need to reduce the level of poverty.
Answer: A
11. A society that operates below the production possibility curve is using its productive resources
A. optimally.
B. efficiently.
C. inefficiently.
D. maximally.
Answer: C
12. Economic problems arise mainly as a result of
A. inaccurate statistical data in West Africa.
B. excessive wastage of available resources.
C. lack of foresight on the part of resource user.
D. limitations in availability of resources.
Answer: D
13. An outward shift of the production possibility curve shows that
A. production is shifting to the right.
B. resources are underutilized.
C. economic growth has taken place.
D. factors of production are moving outward.
Answer: C
14. In a market economy, the problem of what goods to produce is solved primarily by
A. directives of the government.
B. the pattern of consumer’s spending.
C. producers of consumer goods.
D. people producing what they want.
Answer: B
15. A society that is on its production possibility curve
A. has attained full employment but not full production.
B. has attained full production but not full employment.
C. is using its resources inefficiently.
D. has attained both full employment and full production.
Answer: D
16. Economic problems arise because
A. resources are scarce relative to wants.
B. man is insatiable.
C. money is scarce.
D. man engages in too many economic activities.
Answer: A
17. When all factor inputs are reduced by half, the production possibility curve will shift
A. outwards.
B. inwards.
C. downwards.
D. upwards.
Answer: B
18. Every society strives to pursue all the following economic objectives except
A. increased production.
B. price stability.
C. an inequitable distribution of income.
D. sustainable growth and development.
Answer: C
19. When all factor inputs are doubled the production possibility curve will
A. shift from left to right and return to its original position.
B. shift from left to right.
C. remain in its former position.
D. shift from right to left.
Answer: B
20. The decision on what to produce is a problem in
A. all economic systems.
B. a mixed economic system only.
C. a democratic socialist economy only.
D. a free enterprise system only.
Answer: A
21. The outward shift of the production possibility curve could be due to
A. military conquest.
B. increased money supply.
C. inflation.
D. economic growth.
Answer: D
22. Economic problems arise in all societies because
A. resources are mismanaged by leaders.
B. there is no proper planning.
C. resources are not in adequate supply.
D. the services of economists are not employed.
Answer: C
23. Which of the following is not emphasized in a production possibility curve
A. Scarcity of resources.
B. Economic development.
C. Inefficiency in the use of resources.
D. Unemployment of labour.
Answer: B
24. The actual output of an economy is the output
A. which would exist if all resources were fully employed.
B. produced by currently employed labour capital and land.
C. produced in the consumer goods sector.
D. produced in the capital goods sector.
Answer: B
25. The decision to consume more of one product will under normal circumstances imply that
A. more of another product will be consumed.
B. less of something else will be consumed.
C. no other product will be consumed.
D. decision-making is basic in Economics.
Answer: B
26. The fundamental economic problem in every society is
A. the large number of the unemployed.
B. inadequate supply of money.
C. corruption and mismanagement.
D. limited supply of productive resources.
Answer: D
27. A point X inside a production possibility curve indicates that
A. resources are fully utilized.
B. the country is poor.
C. some resources are idle.
D. resources are not available.
Answer: C
28. When the production possibility curve shifts outwards, the economy experiences
A. growth.
B. over-production.
C. inefficient use of resources.
D. under-production.
Answer: A
29. There is unemployment of resources when production is
A. within the production possibility curve.
B. outside the production possibility curve.
C. along the production possibility curve.
D. adequate to meet market demand.
Answer: A
30. The decision to consume more of one product will under normal circumstances imply that
A. more of another product will be consumed.
B. less of something else will be consumed.
C. no other product will be consumed.
D. decision-making is basic in Economics.
Answer: B
31. The fundamental economic problem in every society is
A. the large number of the unemployed.
B. inadequate supply of money.
C. corruption and mismanagement.
D. limited supply of productive resources.
Answer: D
32. A point X inside a production possibility curve indicates that
A. resources are fully utilized.
B. the country is poor.
C. some resources are idle.
D. resources are not available.
Answer: C
33. When the production possibility curve shifts outwards, the economy experiences
A. growth.
B. over-production.
C. inefficient use of resources.
D. under-production.
Answer: A
34. There is unemployment of resources when production is
A. within the production possibility curve.
B. outside the production possibility curve.
C. along the production possibility curve.
D. adequate to meet market demand.
Answer: A
35. A country’s economy can achieve growth by
A. technological advancement.
B. reducing the rate of inflation.
C. improving the labour market.
D. lowering the national debt.
Answer: A
36. The study of economics deals with
A. how societies make choices in the face of scarcity.
B. how to allocate resources efficiently.
C. how to distribute goods and services.
D. all of the above.
Answer: D
37. Which of the following best describes the concept of opportunity cost?
A. The cost of purchasing new resources.
B. The value of the next best alternative that must be forgone when a decision is made.
C. The cost incurred in producing one good.
D. The total amount of resources used in producing goods and services.
Answer: B
38. The law of demand states that
A. as the price of a good increases, demand decreases.
B. as the price of a good decreases, demand remains constant.
C. as the price of a good increases, demand increases.
D. as the price of a good increases, supply decreases.
Answer: A
39. If the price of a good falls, what happens to the quantity demanded?
A. It increases.
B. It decreases.
C. It remains unchanged.
D. It shifts to the right.
Answer: A
40. The concept of diminishing returns refers to
A. a constant increase in output as more resources are added.
B. a decrease in the marginal product of labor as more workers are employed.
C. a decrease in the total cost as more resources are used.
D. an increase in the cost of resources as they become more scarce.
Answer: B
41. When the price of a good or service is set below the market equilibrium, it results in
A. surplus.
B. shortage.
C. efficiency.
D. maximum profits.
Answer: B
42. What does the term ‘marginal cost’ refer to?
A. The total cost incurred for producing a good.
B. The additional cost of producing one more unit of a good.
C. The fixed costs in production.
D. The average cost of producing each unit.
Answer: B
43. Which of the following is an example of a public good?
A. A private car.
B. A streetlight.
C. A smartphone.
D. A restaurant meal.
Answer: B
44. In a mixed economy, which of the following is true?
A. The government owns all resources.
B. The government plays no role in the economy.
C. Private businesses and the government interact in decision-making.
D. All goods are provided free of charge.
Answer: C
45. A monopolist typically maximizes profit by
A. charging the highest possible price for a good.
B. reducing the quantity of goods supplied.
C. producing at the lowest possible cost.
D. setting a price equal to marginal cost.
Answer: B
46. The main difference between microeconomics and macroeconomics is that
A. microeconomics studies individual markets while macroeconomics studies the economy as a whole.
B. microeconomics focuses on government policy while macroeconomics focuses on individuals.
C. microeconomics concerns international trade while macroeconomics concerns domestic issues.
D. microeconomics studies global issues while macroeconomics studies local economies.
Answer: A
47. The primary goal of monetary policy is to
A. control inflation.
B. reduce unemployment.
C. increase government spending.
D. increase tax revenues.
Answer: A
48. If the government wants to stimulate the economy during a recession, it might
A. increase taxes.
B. cut government spending.
C. decrease interest rates.
D. increase interest rates.
Answer: C
49. The term ‘elasticity’ in economics refers to
A. the responsiveness of demand or supply to changes in price.
B. the flexibility of economic policies.
C. the level of government intervention in the market.
D. the extent to which income affects demand.
Answer: A
50. Which of the following is not a characteristic of a perfectly competitive market?
A. Many sellers.
B. Homogeneous products.
C. Barriers to entry.
D. Perfect information.
Answer: C
51. Which of the following is an example of a macroeconomic issue?
A. A firm deciding how much of a product to produce.
B. A government setting interest rates to control inflation.
C. A household deciding how much to save.
D. A company choosing its suppliers.
Answer: B
52. In which economic system are goods and services distributed based on a central plan?
A. Market economy.
B. Mixed economy.
C. Command economy.
D. Traditional economy.
Answer: C
53. The concept of opportunity cost is most closely related to which basic economic problem?
A. What to produce.
B. How to produce.
C. For whom to produce.
D. Scarcity.
Answer: D
54. The law of demand states that, other things being equal, as the price of a good rises, the quantity demanded
A. increases.
B. decreases.
C. stays the same.
D. fluctuates unpredictably.
Answer: B
55. Which of the following is not a characteristic of a market economy?
A. Private property.
B. Government regulation of production.
C. Competition.
D. Consumer sovereignty.
Answer: B
56. Which of the following is an example of a positive economic statement?
A. The government should increase taxes to reduce income inequality.
B. Inflation is harmful to the economy.
C. The minimum wage should be raised to improve workers’ living standards.
D. The inflation rate is currently 3%.
Answer: D
57. In economics, the term “utility” refers to
A. the price of a good or service.
B. the satisfaction derived from consuming a good or service.
C. the income earned from a good or service.
D. the physical quantity of a good.
Answer: B
58. A shift in the demand curve to the right indicates
A. a decrease in demand.
B. an increase in demand.
C. a change in price.
D. no change in the market.
Answer: B
59. Which of the following is considered a non-price determinant of demand?
A. The price of related goods.
B. Consumer income.
C. Consumer preferences.
D. All of the above.
Answer: D
60. A market failure occurs when
A. there is insufficient government intervention.
B. the market does not allocate resources efficiently.
C. consumers do not have enough information.
D. demand exceeds supply.
Answer: B
61. In the context of supply and demand, equilibrium is reached when
A. the quantity supplied is greater than the quantity demanded.
B. the quantity demanded is greater than the quantity supplied.
C. the quantity supplied equals the quantity demanded.
D. there is excess supply in the market.
Answer: C
62. Which of the following is a consequence of inflation?
A. Reduced purchasing power.
B. Increased unemployment.
C. Economic stability.
D. Increased production.
Answer: A
63. Which of the following best describes a recession?
A. A prolonged increase in real GDP.
B. A significant decline in economic activity for two consecutive quarters or more.
C. A situation where inflation is very low.
D. A rapid increase in consumer demand.
Answer: B
64. In economics, “factors of production” refer to
A. all the consumer goods in an economy.
B. the resources used to produce goods and services.
C. the level of government intervention in the market.
D. the wages paid to labor.
Answer: B
65. Which of the following is a characteristic of a perfectly competitive market?
A. A few large firms dominate the market.
B. There are no barriers to entry.
C. There is a significant amount of government regulation.
D. Firms have the ability to set prices.
Answer: B
66. The GDP deflator is used to
A. measure the rate of inflation.
B. calculate the total value of goods and services produced in an economy.
C. adjust nominal GDP for inflation.
D. measure the unemployment rate.
Answer: C
67. A market structure where a few large firms dominate the market but there is still competition is called
A. Perfect competition.
B. Monopoly.
C. Oligopoly.
D. Monopolistic competition.
Answer: C
68. The price elasticity of demand measures
A. the responsiveness of quantity demanded to a change in price.
B. the total revenue generated by a firm.
C. how much a producer is willing to supply at each price level.
D. the total amount of goods produced in the economy.
Answer: A
69. Which of the following is not a form of market intervention by the government?
A. Price floors.
B. Price ceilings.
C. Taxes and subsidies.
D. Private ownership of resources.
Answer: D
70. Which of the following statements is true about the long-run aggregate supply curve?
A. It is vertical at the natural level of output.
B. It slopes upward.
C. It is horizontal at the natural level of output.
D. It is downward sloping.
Answer: A
71. Which of the following is an example of a public good?
A. A private swimming pool.
B. A highway system.
C. A house in a gated community.
D. A luxury car.
Answer: B
72. The law of diminishing returns states that
A. as more of a variable factor is added to a fixed factor, the marginal product will eventually decrease.
B. as more of a variable factor is added, the total output will eventually decrease.
C. the marginal cost of production will always increase.
D. the total cost of production increases at a decreasing rate.
Answer: A
73. Which of the following is true about monopolies?
A. They always result in lower prices for consumers.
B. They create a situation where one firm controls the entire supply of a good or service.
C. There is a large number of firms producing similar products.
D. They always improve the quality of products.
Answer: B
74. Which of the following is not a factor that influences the supply of a good or service?
A. The cost of production.
B. Consumer income.
C. Technological advances.
D. Government regulation.
Answer: B
75. The concept of “marginal utility” refers to
A. the total satisfaction a consumer gets from all units of a good or service.
B. the additional satisfaction gained from consuming one more unit of a good or service.
C. the total cost of producing a good.
D. the cost of the resources used to produce a good.
Answer: B
76. A situation where total spending in an economy exceeds the output of goods and services is known as
A. Inflation.
B. Deflation.
C. A budget surplus.
D. An economic boom.
Answer: A
77. Which of the following would most likely lead to an increase in the demand for a good?
A. An increase in the price of a substitute good.
B. A decrease in consumer income.
C. A decrease in the price of the good itself.
D. A decrease in consumer preferences for the good.
Answer: A
78. Which of the following is an example of a government regulation designed to correct market failure?
A. A price ceiling on essential goods.
B. A tax on cigarettes to reduce consumption.
C. A subsidy for renewable energy sources.
D. All of the above.
Answer: D
79. The most basic function of money is to
A. serve as a store of value.
B. act as a medium of exchange.
C. be used to transfer wealth.
D. provide a standard of deferred payment.
Answer: B
80. A firm that produces at the lowest possible cost is said to be
A. experiencing diseconomies of scale.
B. operating at its minimum efficient scale.
C. experiencing economies of scale.
D. using too much labor.
Answer: B
81. A progressive tax system is one in which
A. the tax rate is the same for all individuals.
B. individuals with higher incomes pay a larger percentage of their income in taxes.
C. the government imposes higher taxes on goods and services.
D. individuals with lower incomes pay a larger percentage of their income in taxes.
Answer: B
82. The concept of “demand-pull inflation” occurs when
A. supply factors cause prices to rise.
B. increased demand causes prices to rise.
C. the government reduces demand to lower prices.
D. higher wages cause an increase in demand.
Answer: B
83. What is the primary goal of monetary policy?
A. To regulate government spending.
B. To control the money supply and interest rates.
C. To increase exports and reduce imports.
D. To redistribute income.
Answer: B
84. Which of the following is most likely to shift the supply curve to the right?
A. An increase in production costs.
B. A decrease in the price of raw materials.
C. A decrease in taxes on producers.
D. An increase in labor wages.
Answer: B
85. Which of the following represents a disadvantage of using fiscal policy to stabilize the economy?
A. It can be implemented too quickly to be effective.
B. It may lead to government budget deficits.
C. It is primarily aimed at controlling the money supply.
D. It has no impact on aggregate demand.
Answer: B
86. A country that produces more of one good than another is said to have a
A. comparative advantage.
B. absolute advantage.
C. balanced trade.
D. competitive advantage.
Answer: B
87. The concept of “consumer surplus” refers to
A. the price consumers are willing to pay for a good.
B. the difference between the price consumers are willing to pay and the price they actually pay.
C. the total value of all goods and services in the market.
D. the difference between the cost of production and the price at which a good is sold.
Answer: B
88. Which of the following is an example of a negative externality?
A. Pollution caused by a factory.
B. A new technology that benefits consumers.
C. A decrease in the price of a good.
D. The enjoyment of a public park.
Answer: A
89. In the context of international trade, the term “comparative advantage” refers to
A. the ability of a country to produce a good more efficiently than another country.
B. the advantage of trading goods and services internationally.
C. the ability of a country to produce a good at a lower opportunity cost than another country.
D. a situation where a country is self-sufficient.
Answer: C
90. In a perfectly competitive market, firms are considered price takers because
A. they have no control over the price of their product.
B. they set the prices for their goods.
C. they work together to control the prices in the market.
D. they have only a few competitors.
Answer: A
91. If a country has an absolute advantage in producing both goods, it should
A. not trade with other countries.
B. specialize in producing one good and trade the other good.
C. focus on producing all goods for domestic consumption.
D. produce the goods equally and not engage in trade.
Answer: B
92. Which of the following is true about public goods?
A. They are non-excludable and non-rivalrous.
B. They are excludable and rivalrous.
C. They are both excludable and rivalrous.
D. They are neither excludable nor rivalrous.
Answer: A
93. Which of the following is an example of a capital good?
A. A worker’s labor.
B. A new software program.
C. A factory building.
D. A product being sold to consumers.
Answer: C
94. When the demand for a good is inelastic,
A. consumers will buy more of the good when the price rises.
B. a change in price will lead to a small change in the quantity demanded.
C. the good is considered a luxury item.
D. the demand for the good increases as income decreases.
Answer: B
95. A country’s trade balance refers to
A. the value of exports minus the value of imports.
B. the total value of goods and services produced within its borders.
C. the amount of foreign investment it receives.
D. the amount of foreign debt it has.
Answer: A
96. Which of the following is an example of a barrier to trade?
A. Free trade agreements.
B. Tariffs and quotas.
C. Competitive market policies.
D. A decrease in foreign exchange rates.
Answer: B
97. When a government imposes a price ceiling,
A. it sets a maximum price that can be charged for a good.
B. it guarantees a minimum price for a good.
C. it allows firms to charge whatever price they want.
D. it eliminates all shortages in the market.
Answer: A
98. If a company increases its production and its total cost increases by the same amount as its total revenue, the firm is experiencing
A. profit maximization.
B. break-even.
C. economies of scale.
D. diminishing returns.
Answer: B
99. Which of the following is a characteristic of monopolistic competition?
A. One firm controls the market.
B. Products are homogeneous.
C. Firms produce differentiated products.
D. There are barriers to entry.
Answer: C
100. What is the effect of an increase in the price of a good on the supply curve?
A. The supply curve shifts to the left.
B. The supply curve shifts to the right.
C. There is a movement along the supply curve, not a shift.
D. The supply curve remains unchanged.
Answer: C
