Basic Economics Sample MCQs

Course	Basic Economics
Sample MCQs

Question Completion Status:

QUESTION 1

If a 2 percent change in price is followed by a 10 percent change in quantity sold, the coefficient of price elasticity is

		0.2.
		5.0.
		8.0.
		20.0.

1 points

QUESTION 2

A firm’s break-even point occurs where

		marginal revenue equals marginal cost.
		marginal revenue equals average variable cost.
		total revenue equals total cost.
		total revenue equals total variable cost.

1 points

QUESTION 3

The marginal propensity to consume is

	a.	the additional desire people have for consumer goods.
	b.	the fraction of a person’s total income normally spent for consumer goods
	c.	the fraction of an increase in income that would be spent on consumer goods.
	d.	the change in consumption resulting from a $1 change in the price level.

1 points

QUESTION 4

As units of input are added to the production process, the average product

		rises and then declines.
		declines and then rises.
		remains the same.
		is always greater than the marginal product.

1 points

QUESTION 5

Every economic system must decide

		what and how much to produce.
		how to produce.
		how to distribute goods and services to the population.
		All of these.

1 points

QUESTION 6

Refer to the following graph. A decrease in supply is reflected as

		a shift of the supply curve from S to S2.
		a shift of the supply curve from S to S1.
		a shift of the supply curve from S2 to S1.
		a change in the quantity supplied from 5.2 to 8.2 million minutes when price is $12.50.

1 points

QUESTION 7

If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000 units, the total profit will be

		$5,000.
		$8,000.
		$10,000.
		$20,000.

1 points

QUESTION 8

Marginal cost is

		the increase in total cost per additional unit of output.
		the increase in total cost per additional unit of input.
		the decrease in total cost from producing one less unit.
		both the increase in total cost per additional unit of output and the decrease in total cost from producing one less unit.

1 points

QUESTION 9

In perfect competition, no individual producer can influence price because

		each contributes an insignificant amount to total supply.
		they are ignorant of the market price.
		it is set by monopolists.
		it is regulated by the government.

1 points

QUESTION 10

The addition to total output resulting from using one more unit of a productive resource is the

		average product.
		marginal input.
		total product.
		marginal product.

1 points

QUESTION 11

The law of demand illustrates that as

		price decreases, demand increases.
		price increases, quantity demanded increases.
		price decreases, quantity supplied increases.
		price decreases, quantity demanded increases.

1 points

QUESTION 12

Which of the following contributes to income inequality?

	a.	unequal abilities
	b.	unequal ownership of property
	c.	discrimination
	d.	All of these

1 points

QUESTION 13

Refer to the following graph. An increase in demand is reflected as

		a shift of the demand curve from D to D1.
		a shift of the demand curve from D to D2.
		movement from point A to B along demand curve D.
		movement from point A to E when the price is $12.50.

1 points

QUESTION 14

A production function is

		a technique for determining the most profitable rate of output.
		the relationship between a combination of inputs and a quantity of output.
		an important factor in determining the shape of the long-run supply curve.
		All of these.

1 points

QUESTION 15

Unlike a firm in pure competition, a monopolist may be able to

		block the entry of new firms into the industry.
		continue to earn economic profits in the long run.
		earn economic profits in the short run.
		both block the entry of new firms into the industry and continue to earn economic profits in the long run.

1 points

QUESTION 16

A need to make choices exists because of

		scarcity of resources.
		the abundance of goods.
		unlimited human needs and wants.
		both scarcity of resources and unlimited human needs and wants.

1 points

QUESTION 17

A movement downward toward the right along a typical production possibilities curve represents

		decreasing production of both goods under consideration.
		increasing production of both goods under consideration.
		increasing production of one good and decreasing production of the other.
		increasing production of one good with no change in production of the other.

1 points

QUESTION 18

During the contraction phase of the business cycle,

	a.	costs fall relative to prices, increasing profit margins.
	b.	costs fall relative to prices, reducing profit margins.
	c.	prices fall relative to costs, increasing profit margins.
	d.	prices fall relative to costs, reducing profit margins.

1 points

QUESTION 19

Under oligopolistic market conditions,

		the pricing actions of any one firm have no significant effect on the others.
		the pricing actions of any one firm have a significant effect on the others.
		no firm can have any control over its output price.
		all firms have identical prices for their products.

1 points

QUESTION 20

In first degree price discrimination,

		each consumer pays the same price.
		all consumer surplus is captured by the seller.
		the seller separates the buyers into different groups.
		the seller charges different prices per unit for different quantities.

1 points

QUESTION 21

For the principle of diminishing marginal returns to hold,

		all resources must vary.
		at least one resource should remain fixed.
		only one resource should vary.
		a minimum of three input resources is necessary.

1 points

QUESTION 22

The conditions for successful price discrimination include

		some ability for the firm to set the price.
		strong barriers segmenting markets.
		an inability for any customer to resell the product.
		All of the above.

1 points

QUESTION 23

The point where quantity demanded and quantity supplied are equal is known as the

		ceiling price.
		minimum price.
		equilibrium price.
		administered price.

1 points

QUESTION 24

Which of the following are injections into the circular flow of income?

	a.	saving, investment, exports, and taxes
	b.	investment, government spending, and exports
	c.	saving, taxes, and imports
	d.	investment, taxes, and imports

1 points

QUESTION 25

Assume that Country A produces 60 tons of sugar using 6 productive units and that Country B produces 40 tons of sugar using 6 productive units. Assume further that Country A produces 120 tons of coffee using 4 units of production and that Country B produces 90 tons of coffee using 4 units of production. It follows that

		Country A has a comparative advantage over Country B in the production of coffee.
		Country A has a comparative advantage over Country B in the production of coffee and sugar.
		Country A has a comparative advantage over Country B in the production of sugar.
		Country B has a comparative advantage over Country A in the production of sugar.

1 points

QUESTION 26

The demand curve for the product of a monopolist is

		a straight horizontal line.
		identical to the market demand curve.
		identical to its MR curve.
		below its MR curve.

1 points

QUESTION 27

The total value of the goods and services produced over a period of time represents an economy’s

		planned savings.
		total income.
		total wealth.
		capital.

1 points

QUESTION 28

An economy’s production possibilities curve could shift outward as a result of a(n)

		increased level of technology.
		reduction in the quantity of capital goods.
		decrease in the production of goods.
		decrease in the amount of available resources.

1 points

QUESTION 29

The bowed-out shape of the production possibilities curve shows that as more of one product is produced,

		the opportunity cost per unit will increase.
		the opportunity cost per unit will decrease.
		the opportunity cost per unit stays the same.
		the production possibilities curve shifts inward.

1 points

QUESTION 30

Consumer surplus occurs whenever the consumer pays a price

		equal to marginal revenue.
		less than the consumer is willing to pay.
		less than marginal cost.
		equal to or less than average total cost.

1 points

QUESTION 31

Use of the principle of comparative advantage involves

		specialization only.
		exchange only.
		both specialization and exchange.
		money only.

1 points

QUESTION 32

For a good to be scarce, it must be something that

		has economic value.
		people find useful.
		is available only in limited quantities.
		All of these.

1 points

QUESTION 33

The classical theory states that

	a.	demand is generally greater than supply.
	b.	prices and interest rates are always stable.
	c.	supply is generally greater than demand.
	d.	supply creates its own demand.

1 points

QUESTION 34

The greater the product differentiation,

		the more elastic a firm’s demand curve.
		the less elastic a firm’s demand curve.
		the less the price difference between competing firms.
		the closer to perfect competition.

1 points

QUESTION 35

National Income is obtained by

	a.	adding all the earnings of productive resources in a given period
	b.	adding personal savings and personal consumption expenditures.
	c.	subtracting personal taxes from personal income.
	d.	subtracting capital consumption allowance from GDP.

1 points

QUESTION 36

The price elasticity of demand is defined as

		the absolute change in price divided by the absolute change in quantity demanded.
		the absolute change in quantity demanded divided by the absolute change in price.
		the percentage change in quantity demanded divided by the percentage change in price.
		the percentage change in price divided by the percentage change in quantity demanded.

1 points

QUESTION 37

If real GDP increases by 5 percent and the population increases by 10 percent during the same

	a.	decreases.
	b.	increases if prices rise.
	c.	increases.
	d.	remains unchanged.

1 points

QUESTION 38

Business cycles can be described as

	a.	fluctuations around a long-term growth trend.
	b.	changes in economic activity due to natural causes.
	c.	changes in business activity due to wars.
	d.	increases in the level of business activity over an extended period of time.

1 points

QUESTION 39

Which of the following is an example of marginal analysis?

		a fast food restaurant that only serves lunch and dinner trying to determine if it should open for breakfast.
		a company looking at its total costs of production.
		a worker calculating his total income.
		an economist analyzing total output for the U.S. economy.