Fundamentals of Economic Decision-Making Quiz

Explore fundamentals of decision-making in economics with this quiz. Test your understanding of demand, cost, market structures, policy, and more!

Practice Learn Test

What does the law of demand state?

As the price of a good increases, the quantity demanded increases.

As the price of a good increases, the quantity demanded decreases.

As the price of a good decreases, the quantity demanded increases.

As the price of a good decreases, the quantity demanded decreases.

Which of the following is an example of a fixed cost?

Raw materials

Labor wages

Rent for factory space

Cost of electricity

What is the opportunity cost of a decision?

The actual cost incurred in making the decision

The value of the next best alternative forgone

The total cost of all available alternatives

The financial cost of implementing the decision

In economics, what does 'ceteris paribus' mean?

All else being equal

Under perfect competition

Demand equals supply

Cost-benefit analysis

What is the formula for calculating price elasticity of demand?

Percentage change in quantity demanded / Percentage change in price

Percentage change in price / Percentage change in quantity demanded

Change in quantity demanded / Change in price

Change in price / Change in quantity demanded

Which of the following is a characteristic of a monopolistic competition market structure?

One seller dominates the market

Homogeneous products

Significant barriers to entry

Product differentiation

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

A progressive tax takes a larger percentage of income from high-income earners, while a regressive tax takes a larger percentage from low-income earners.

A regressive tax takes a larger percentage of income from high-income earners, while a progressive tax takes a larger percentage from low-income earners.

A progressive tax charges a fixed amount regardless of income level, while a regressive tax varies based on income.

A regressive tax charges a fixed amount regardless of income level, while a progressive tax varies based on income.

Which of the following is not a characteristic of a perfectly competitive market?

Many buyers and sellers

Homogeneous products

Barriers to entry

Perfect information

What is the role of the central bank in a country's economy?

Control inflation through monetary policy

Regulate competition in the market

Set fiscal policy

Control foreign exchange rates

#10

What is the difference between microeconomics and macroeconomics?

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

Macroeconomics focuses on individual markets, while microeconomics studies the economy as a whole.

Microeconomics studies the behavior of individual consumers, while macroeconomics studies the behavior of firms.

Macroeconomics studies the behavior of individual consumers, while microeconomics studies the behavior of firms.

#11

What is the difference between nominal GDP and real GDP?

Nominal GDP is adjusted for inflation, while real GDP is not.

Real GDP is adjusted for inflation, while nominal GDP is not.

Nominal GDP includes only goods and services produced domestically, while real GDP includes goods and services produced internationally.

Real GDP includes only goods and services produced domestically, while nominal GDP includes goods and services produced internationally.

#12

What is fiscal policy?

The use of government spending and taxation to influence the economy.

The management of the money supply and interest rates by the central bank.

The regulation of competition in the market by government agencies.

The control of foreign exchange rates by the central bank.