#1
Which of the following best defines opportunity cost?
The value of the next best alternative foregone
ExplanationOpportunity cost is the value of the next best alternative that must be forgone in order to pursue a particular choice.
#2
In economics, what does GDP stand for?
Gross Domestic Product
ExplanationGDP stands for Gross Domestic Product, which represents the total value of all goods and services produced in a country.
#3
Which of the following is NOT a factor of production in economics?
Technology
ExplanationTechnology is not considered a factor of production in economics; instead, factors include land, labor, and capital.
#4
What is the primary goal of fiscal policy?
To stabilize the economy through government spending and taxation
ExplanationThe primary goal of fiscal policy is to stabilize the economy through government spending and taxation.
#5
What does the term 'inflation' refer to in economics?
A sustained increase in the general price level of goods and services
ExplanationInflation in economics refers to a sustained increase in the general price level of goods and services in an economy.
#6
Which economic principle suggests that as the price of a good increases, the quantity demanded decreases, all else being equal?
Law of Demand
ExplanationThe Law of Demand states that, all else being equal, as the price of a good rises, the quantity demanded for that good falls.
#7
What does the term 'monopoly' refer to in economics?
A market with only one seller and many buyers
ExplanationIn economics, a monopoly refers to a market structure where there is only one seller, dominating the market with many buyers.
#8
What does the term 'elasticity' refer to in economics?
The responsiveness of quantity demanded to a change in price
ExplanationElasticity in economics refers to the responsiveness of quantity demanded to a change in price.
#9
What is the main function of a central bank in a country's economy?
To control inflation and interest rates
ExplanationThe main function of a central bank is to control inflation and interest rates in a country's economy.
#10
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products and ease of entry and exit
ExplanationA perfectly competitive market is characterized by homogeneous products and ease of entry and exit for firms.
#11
Which economist is famously known for his theory of the 'Invisible Hand'?
Adam Smith
ExplanationAdam Smith is famously known for his theory of the 'Invisible Hand,' which suggests that individuals pursuing self-interest unintentionally contribute to the overall economic good.
#12
According to the law of diminishing returns, what happens when additional units of a variable input are added to a fixed input in the production process?
Total product increases at a decreasing rate
ExplanationThe law of diminishing returns states that as additional units of a variable input are added to a fixed input, the total product increases at a decreasing rate.
#13
In economics, what is the term used to describe the level of output where marginal cost equals marginal revenue?
Profit maximization
ExplanationProfit maximization in economics refers to the level of output where marginal cost equals marginal revenue, resulting in the maximum possible profit.