Economic Principles of Scarcity, Choice, and Cost Quiz

Test your understanding of economic principles with questions on scarcity, opportunity cost, production possibilities, and more.

Practice Learn Test

Which of the following best defines scarcity in economics?

The unlimited wants of individuals

The limited resources available to fulfill unlimited wants

The ability of individuals to satisfy all their wants and needs

The surplus of goods and services in the market

What is the opportunity cost of a decision?

The total monetary cost incurred

The benefits gained from the decision

The value of the next best alternative foregone

The additional cost of the decision

What is the formula to calculate total revenue?

Total Revenue = Price × Quantity Demanded

Total Revenue = Price ÷ Quantity Demanded

Total Revenue = Quantity Demanded - Price

Total Revenue = Price + Quantity Demanded

What is the primary goal of a firm in a market economy?

To maximize profits

To minimize costs

To eliminate competition

To control prices

What is the law of demand?

As price increases, quantity demanded increases

As price decreases, quantity demanded decreases

As price increases, quantity demanded decreases

As price decreases, quantity demanded increases

In economics, what does the production possibilities frontier represent?

The maximum amount of resources available

The optimal combination of goods and services

The trade-offs between two goods that can be produced

The unlimited potential of an economy

What is the law of diminishing marginal utility?

As the consumption of a good increases, its total utility decreases

The more of a good consumed, the less satisfaction is derived from each additional unit

Consumers will buy more of a good when its price decreases

The demand for a good is inversely proportional to its price

What is the difference between explicit and implicit costs in economics?

Explicit costs are monetary payments while implicit costs are the opportunity costs of using resources owned by the firm

Implicit costs are the actual payments made by the firm while explicit costs are the opportunity costs of using resources owned by the firm

Explicit costs are the opportunity costs of using resources owned by the firm while implicit costs are monetary payments

Explicit costs are associated with fixed inputs while implicit costs are associated with variable inputs

What is the significance of the price elasticity of demand?

It measures the responsiveness of quantity demanded to changes in price

It measures the responsiveness of quantity supplied to changes in price

It measures the sensitivity of consumer income to changes in price

It measures the impact of taxes on consumer behavior

#10

What is the difference between a normal good and an inferior good?

Normal goods are always of higher quality than inferior goods

Normal goods are luxury items while inferior goods are necessities

Normal goods experience an increase in demand as income rises, while inferior goods experience a decrease in demand as income rises

Normal goods experience a decrease in demand as income rises, while inferior goods experience an increase in demand as income rises

#11

How does specialization contribute to economic efficiency?

By reducing competition among producers

By allowing individuals and firms to focus on what they do best

By increasing the prices of goods and services

By limiting consumer choices

#12

How does a perfectly competitive market differ from a monopolistic market?

In a perfectly competitive market, there are many buyers and sellers, while in a monopolistic market, there is only one seller

In a perfectly competitive market, products are differentiated, while in a monopolistic market, products are identical

In a perfectly competitive market, firms have control over prices, while in a monopolistic market, prices are set by the market

In a perfectly competitive market, there are barriers to entry, while in a monopolistic market, entry is free

#13

What role does government intervention play in market economies?

To eliminate competition and establish monopolies

To ensure fair competition and prevent market failures

To set prices and control production levels

To limit consumer choices and preferences

#14

How does a subsidy affect the supply curve?

It shifts the supply curve to the right

It shifts the supply curve to the left

It has no effect on the supply curve

It causes the supply curve to become vertical

#15

What is the difference between a regressive and a progressive tax?

Regressive taxes take a higher percentage of income from low-income earners, while progressive taxes take a higher percentage from high-income earners

Regressive taxes take a higher percentage of income from high-income earners, while progressive taxes take a higher percentage from low-income earners

Regressive taxes apply the same percentage of tax to all income levels, while progressive taxes increase as income increases

Regressive taxes apply different tax rates to different income levels, while progressive taxes apply the same rate to all income levels