Fundamental Principles of Economics Quiz

Test your knowledge with 15 questions on economics basics, including demand, supply, GDP, fiscal & monetary policies, and market structures.

Practice Learn Test

Which of the following best defines economics?

The study of how individuals make purchasing decisions

The study of how societies allocate scarce resources to satisfy unlimited wants

The study of how businesses determine their profit margins

The study of how governments regulate markets

What does the law of demand state?

As price decreases, quantity demanded increases

As price decreases, quantity demanded decreases

As price increases, quantity demanded increases

As price increases, quantity demanded decreases

Which of the following is NOT a factor of production?

Land

Labor

Money

Capital

What is the law of supply?

As price decreases, quantity supplied decreases

As price increases, quantity supplied decreases

As price increases, quantity supplied increases

As price decreases, quantity supplied increases

What is the concept of utility in economics?

The total satisfaction derived from consuming a good or service

The total profit earned by a firm

The total revenue generated by selling a product

The total cost incurred in production

Which of the following is a factor that can shift the supply curve?

Changes in consumer tastes and preferences

Changes in the price of related goods

Changes in the price of inputs

Changes in income levels

What is the opportunity cost of a decision?

The explicit cost incurred

The implicit cost incurred

The value of the best alternative forgone

The total cost of the decision

In economics, what is the function of a production possibility frontier (PPF)?

To illustrate the combinations of goods and services that can be produced with available resources

To depict the maximum level of production efficiency achievable by a society

To determine the optimal distribution of resources among competing industries

To forecast future economic growth and development

What is the difference between microeconomics and macroeconomics?

Microeconomics focuses on individual markets, while macroeconomics studies the economy as a whole

Microeconomics studies how individual consumers make decisions, while macroeconomics examines government policies

Microeconomics studies the behavior of individual firms, while macroeconomics analyzes international trade

Microeconomics focuses on economic growth, while macroeconomics analyzes income distribution

#10

What is fiscal policy?

Government regulation of interest rates

Government policy aimed at controlling inflation

Government policy concerning taxation and spending

Government intervention in international trade

#11

What is the formula for calculating GDP (Gross Domestic Product)?

Consumption + Investment + Government Spending + Exports - Imports

Consumption + Investment - Government Spending + Exports - Imports

Consumption + Investment + Government Spending - Exports + Imports

Consumption - Investment + Government Spending + Exports - Imports

#12

What is the concept of elasticity in economics?

The measure of how sensitive quantity demanded is to changes in price

The measure of how sensitive quantity supplied is to changes in price

The measure of how sensitive demand is to changes in income

The measure of how sensitive supply is to changes in production costs

#13

According to the law of diminishing marginal utility, what happens as more units of a good are consumed?

Total utility increases

Marginal utility increases

Total utility decreases

Marginal utility decreases

#14

What is the difference between absolute advantage and comparative advantage?

Absolute advantage refers to the ability to produce a good using fewer resources, while comparative advantage refers to the ability to produce a good at a lower opportunity cost

Absolute advantage refers to the ability to produce a good at a lower opportunity cost, while comparative advantage refers to the ability to produce a good using fewer resources

Absolute advantage refers to the ability to produce a good domestically, while comparative advantage refers to the ability to produce a good for export

Absolute advantage refers to the ability to produce a good without external assistance, while comparative advantage refers to the ability to produce a good with government subsidies

#15

What is the Phillips Curve in economics?

A graphical representation showing the relationship between inflation and unemployment

A measure of income inequality within a society

A model illustrating the effect of taxation on consumer behavior

A theory explaining the impact of government deficits on interest rates