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- December 7, 2024
Question 41
What does the term “marginal” refer to in economics?
a) The total sum of a good or service
b) The additional or incremental change from one more unit
c) The average of all units produced
d) The difference between total costs and total revenue
Answer: b) The additional or incremental change from one more unit
Explanation: Marginal refers to the effect of producing or consuming one additional unit of a good or service, such as marginal cost or marginal benefit.
Question 42
What is a comparative advantage?
a) When a country can produce more of a good than another country using the same resources
b) When a country can produce a good at a lower opportunity cost than another country
c) When a country imports more than it exports
d) When a country specializes in all goods
Answer: b) When a country can produce a good at a lower opportunity cost than another country
Explanation: Comparative advantage occurs when a country can produce a good at a lower opportunity cost, leading to more efficient production and beneficial trade.
Question 43
What is the business cycle?
a) The natural rate of unemployment
b) The recurring pattern of expansion and contraction in the economy
c) The cycle of investment in new technology
d) The process of job creation and destruction
Answer: b) The recurring pattern of expansion and contraction in the economy
Explanation: The business cycle consists of periods of economic expansion (growth) followed by contraction (recession), and these fluctuations impact employment and output.
Question 44
What is deadweight loss?
a) A reduction in total surplus due to market inefficiencies
b) The total cost of producing a good or service
c) The difference between supply and demand
d) The total profit made by a monopoly
Answer: a) A reduction in total surplus due to market inefficiencies
Explanation: Deadweight loss refers to lost economic efficiency that occurs when the equilibrium outcome is not achieved, often due to taxes, subsidies, or other market distortions.
Question 45
What is a command economy?
a) An economy where decisions are made by individual firms and households
b) An economy where production and prices are controlled by the government
c) An economy with no government involvement
d) An economy driven solely by international trade
Answer: b) An economy where production and prices are controlled by the government
Explanation: In a command economy, the government controls all major aspects of production and pricing, and individual choices are limited.
Question 46
What is meant by structural unemployment?
a) Unemployment caused by short-term economic fluctuations
b) Unemployment caused by changes in the structure of the economy, such as technological advancements or shifts in demand
c) Unemployment caused by seasonal changes in labor demand
d) Unemployment due to lack of job-search effort
Answer: b) Unemployment caused by changes in the structure of the economy, such as technological advancements or shifts in demand
Explanation: Structural unemployment occurs when industries decline or technologies replace jobs, leading to a mismatch between workers' skills and available jobs.
Question 47
What is a monopoly?
a) A market with many buyers and sellers
b) A market where only one firm supplies a product with no close substitutes
c) A market where prices are regulated by the government
d) A market where consumers set the prices
Answer: b) A market where only one firm supplies a product with no close substitutes
Explanation: In a monopoly, a single firm dominates the market, often leading to higher prices and reduced consumer choices due to the lack of competition.
Question 48
What does gross domestic product (GDP) measure?
a) The total value of all financial transactions in an economy
b) The total value of all goods and services produced within a country’s borders over a specific period
c) The amount of income earned by households
d) The total amount of foreign investment in an economy
Answer: b) The total value of all goods and services produced within a country’s borders over a specific period
Explanation: GDP is the most common measure of a country’s economic performance, representing the total value of all goods and services produced domestically.
Question 49
What is an excise tax?
a) A tax on the sale of imported goods
b) A tax on the production or sale of a specific good
c) A tax based on individual income
d) A tax on property ownership
Answer: b) A tax on the production or sale of a specific good
Explanation: Excise taxes are levied on specific goods, such as gasoline, tobacco, or alcohol, and are often used to reduce consumption of harmful products.
Question 50
What is the law of diminishing marginal utility?
a) As more of a good is consumed, the additional satisfaction from consuming an extra unit decreases
b) As more goods are produced, the cost of production decreases
c) As demand for a product increases, prices tend to fall
d) As the price of a good rises, the satisfaction from consuming it increases
Answer: a) As more of a good is consumed, the additional satisfaction from consuming an extra unit decreases
Explanation: The law of diminishing marginal utility states that as a person consumes more of a product, the satisfaction gained from each additional unit decreases.
