ECONOMICS 2024/2025 Trial Test Questions (50) Objective Questions

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Select the correct options for each Questions below

1. What happens to equilibrium price and quantity when there is an increase in demand and a decrease in supply?

a) Price increases, quantity is indeterminate. b) Quantity increases, price is indeterminate. c) Both price and quantity increase. d) Both price and quantity decrease.

2. If the price of a good increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand?

a) 1.5 b) 0.67 c) 0.15 d) 1.0

3. Which of the following is not a determinant of demand?

a) Income b) Price of related goods c) Government policies d) Expectations about future prices

4. In perfect competition, firms are price takers because:

a) They have significant market power. b) They produce homogeneous products. c) They face barriers to entry. d) They can influence market price.

5. What is the main characteristic of a monopoly market structure?

a) Many firms producing identical products. b) Few firms producing differentiated products. c) Single firm producing the entire output of the industry. d) Firms compete based on non-price factors.

6. What is the term for the additional cost incurred by producing one more unit of output?

a) Average cost b) Marginal cost c) Fixed cost d) Variable cost

7. Which market structure is characterized by many sellers, differentiated products, and easy entry and exit?

a) Monopoly b) Oligopoly c) Perfect competition d) Monopolistic competition

8. Which of the following is not a factor of production?

a) Labor b) Capital c) Goods d) Land

9. Gross Domestic Product (GDP) is:

a) The total value of goods and services produced within a country in a given period. b) The total value of goods and services produced by a country's citizens, regardless of location. c) The total value of goods and services produced by a country's residents, regardless of location. d) The total value of goods and services produced within a country's borders, regardless of ownership.

10. Inflation is:

a) A general increase in the prices of goods and services over time. b) A general decrease in the prices of goods and services over time. c) An increase in the purchasing power of money. d) A decrease in the purchasing power of money.

11. Unemployment resulting from changes in technology and consumer preferences is called:

a) Seasonal unemployment b) Structural unemployment c) Frictional unemployment d) Cyclical unemployment

12. Open market operations are a tool of:

a) Fiscal policy b) Monetary policy c) Supply-side policy d) Trade policy

13. Economic growth refers to:

a) An increase in the overall level of prices in the economy. b) An increase in the quantity and quality of goods and services produced over time. c) A situation where total spending exceeds total production. d) A decrease in the overall level of prices in the economy.

14. Which of the following is a tool of fiscal policy?

a) Open market operations b) Discount rate c) Government spending d) Reserve requirement

15. Economic development refers to:

a) The process of increasing the standard of living for individuals. b) The growth of a nation's economy measured by GDP per capita. c) The process of improving the economic and social well-being of a society. d) The transition from an agricultural to an industrial economy.

16. A nation has a trade deficit when:

a) Exports exceed imports. b) Imports exceed exports. c) The balance of trade is zero. d) The balance of payments is negative.

17. Poverty is often measured by:

a) The unemployment rate. b) GDP per capita. c) The poverty line. d) Inflation rate.

18. The study of how people make decisions in a world of scarcity is known as:

a) Microeconomics b) Macroeconomics c) Econometrics d) Economic planning

19. Which of the following is an example of a negative externality?

a) A company providing free health care to its employees. b) A homeowner installing solar panels to reduce energy costs. c) Pollution from a factory affecting nearby residents' health. d) A community garden providing fresh produce to local residents.

20. The study of how changes in the tax system affect economic behavior is known as:

a) Fiscal policy b) Supply-side economics c) Public finance d) Taxation economics

21. Which of the following statements best describes the relationship between inflation and unemployment?

a) There is a positive relationship between inflation and unemployment. b) There is a negative relationship between inflation and unemployment. c) There is no relationship between inflation and unemployment. d) The relationship between inflation and unemployment is unpredictable.

22. The rate at which a country's population is growing is known as:

a) Birth rate b) Death rate c) Population growth rate d) Replacement rate

23. Which of the following is a factor that contributes to income inequality?

a) Progressive taxation b) Technological advancements c) Government welfare programs d) Equal access to education

24. Environmental sustainability refers to:

a) The ability to maintain current levels of resource consumption indefinitely. b) The preservation of natural habitats and ecosystems. c) The use of renewable energy sources. d) The sustainable management of resources to meet current and future needs.

25. Which of the following is a characteristic of a developed economy?

a) High levels of poverty b) High levels of income inequality c) High levels of industrialization and urbanization d) Low levels of technological advancement

26. Which of the following is a limitation of GDP as a measure of economic welfare?

a) It does not account for income distribution. b) It does not account for environmental degradation. c) It does not account for non-market transactions. d) All of the above

27. Which of the following is an example of expansionary fiscal policy?

a) Decreasing government spending b) Increasing taxes c) Decreasing the money supply d) Increasing government spending

28. Which of the following is a function of the World Trade Organization (WTO)?

a) Promoting free trade agreements among member countries b) Regulating international financial markets c) Providing financial assistance to developing countries d) Setting standards for environmental protection

29. Which of the following best describes a progressive tax system?

a) Everyone pays the same rate regardless of income. b) Higher-income individuals pay a higher percentage of their income in taxes. c) Lower-income individuals pay a higher percentage of their income in taxes. d) There is no taxation.

30. Which of the following is an example of a public good?

a) Healthcare b) Cable television c) Private education d) Roads and highways

31. What is the primary function of the Federal Reserve System?

a) Regulating international trade b) Regulating the money supply c) Managing public debt d) Providing financial assistance to developing countries

32. Which of the following is a measure of income inequality?

a) Lorenz curve b) Phillips curve c) Laffer curve d) Engel curve

33. A tariff is a tax imposed on:

a) Imports b) Exports c) Both imports and exports d) None of the above

34. Which of the following is a characteristic of monopolistic competition?

a) Many buyers and many sellers b) One buyer and many sellers c) Few buyers and many sellers d) One buyer and one seller

35. Technological change is most likely to:

a) Increase unemployment in the short run, but decrease it in the long run. b) Increase unemployment in both the short run and the long run. c) Decrease unemployment in both the short run and the long run. d) Have no impact on unemployment.

36. Which of the following is true about a perfectly competitive market?

a) There are few sellers in the market. b) Firms can easily enter or exit the market. c) Products are differentiated. d) Firms have some control over the price of their products.

37. Which of the following is an example of a substitute good?

a) Peanut butter and jelly b) Peanut butter and honey c) Peanut butter and bananas d) Peanut butter and chocolate

38. The price elasticity of demand measures:

a) The responsiveness of quantity demanded to changes in price. b) The responsiveness of quantity supplied to changes in price. c) The percentage change in quantity demanded divided by the percentage change in price. d) The percentage change in price divided by the percentage change in quantity demanded.

39. If the cross-price elasticity of demand for two goods is positive, it means that:

a) The goods are substitutes. b) The goods are complements. c) The goods are normal goods. d) The goods are inferior goods.

40. Which of the following is true about a perfectly elastic demand curve?

a) The price elasticity of demand is zero. b) The quantity demanded is zero at all prices. c) The price remains constant regardless of the quantity demanded. d) The demand curve is vertical.

41. Which of the following is a characteristic of a natural monopoly?

a) Many firms competing in the market b) Low barriers to entry c) Economies of scale over the entire range of production d) Perfectly elastic demand curve

42. Which of the following is an example of a government failure?

a) Providing public goods b) Regulating monopolies c) Implementing antitrust laws d) Inefficient allocation of resources

43. Economic growth is often measured by an increase in:

a) Population b) Real GDP c) Inflation d) Government spending

44. The market demand curve is:

a) Always upward sloping. b) Always downward sloping. c) Horizontal. d) Downward sloping in a perfectly competitive market.

45. Which of the following is an example of an implicit cost?

a) Wages paid to employees b) Rent paid for office space c) Interest paid on a business loan d) The income foregone by using a resource in a particular way.

46. Which of the following is a characteristic of monopolistic competition?

a) Many buyers and many sellers b) One buyer and many sellers c) Few buyers and many sellers d) One buyer and one seller

47. A nation has a comparative advantage in producing a good if it can produce that good:

a) Using fewer resources than other nations. b) Using the same amount of resources as other nations. c) Using more resources than other nations. d) Regardless of the resources available.

48. Which of the following is a characteristic of a command economy?

a) Private ownership of resources b) Centralized government planning c) Market forces determining resource allocation d) Minimal government intervention

49. Which of the following is a measure of income inequality?

a) Poverty rate b) Gini coefficient c) Human Development Index (HDI) d) Unemployment rate

50. Which of the following is a measure of economic development?

a) GDP per capita b) Inflation rate c) Gini coefficient d) Poverty rate